Subject: File No. S7-25-99
From: Michael E Kitces, MSFS, CFPr, CLU, ChFC, RHU, REBC
Affiliation: Director of Financial Planning

August 24, 2004

To Whom It May Concern:
I am writing to strongly urge the SEC to withdraw the proposed broker-dealer exemption rule. The entire basis of this proposal can only serve to potentially mislead the public.

Investment Advisors that work on a fee basis have always been held to a fiduciary standard under the Investment Advisors Act of 1940. To the public, an individual under a broker-dealer that holds himself/herself out to the public as a fee-based financial advisor IMPLIES that same fiduciary status - because up until this rule proposal, by definition, the ONLY people that COULD operate on such a basis WERE fidcuaries The public has no understanding that such a fee-based arrangement COULD be existing on a non-fiduciary basis. It is POSSIBLE that an individual MIGHT see the subsequent brokerage disclosures, which would serve to clarify that the arrangement actually is NOT a fiduciary relationship - but WHY ON EARTH would the SEC want to encourage and allow certain advisors to present themselves as fee-based advisors with the implied fiduciary status and then subsequently disclose that such a relationship doesnt exist? The ONLY possible result is that some people will understand the relationship correctly, some WILL NOT, and MANY will NEVER GET TO the disclosure that NEGATES the way the advisor held himself/herself out to the public in the first place It is inevitable that some consumers will be misled with a policy of misrepresent yourself up front as long as you disclose otherwise later.

The AARP and the Consumer Federation of America all join to STRONGLY oppose this rule, which can only potentially mislead the public in regards to an arrangement and fee structure that has ALWAYS EXCLUSIVELY been a fiduciary arrangement. I have yet to EVER see a commercial that states Pay a flat fee up front for unlimited trading in a brokerage arrangement - which is ostensibly what the rule is SUPPOSED to cover - instead, the only advertising we see are commercials from such firms as Morgan Stanley that CLEARLY imply a personal relationship and a fee-based advisory structure, which is CLEARLY MEANT to imply a fiduciary relationship even though one does not exist.

Please withdraw this rule, and do not proceed on the basis of its ok to misrepresent yourself as long as you properly disclose otherwise later - the public can only be harmed by such a structure, when not everyone correctly understands the negatory disclosure.