Subject: File No. S7-25-99
From: Roger Russell, CFP

August 28, 2004


I must urge you to withdraw, not amend, your proposed amendment known as the "Merrill Lynch Rule."

As a CFP and Investment Advisory Associate for almost 20 years, I have a fiduciary duty to put the interests of my advisory clients ahead of my own. I am therefore held to a totally different standard than are brokers who are not fiduciaries, yet the public sees us all as the same because they are advertising and holding themselves out as "financial advisors" and "financial planners." Unfortunately, over the years I have seen many abuses by wire house, insurance company and bank brokers in their wrap accounts and advisory fee business.

Many brokers charge "financial planning fees" for a financial plan, which should make them a fiduciary. Yet because of the exemption, they were then able to sell their clients proprietary insurance and annuity products, or proprietary mutual funds issued by their employer that are much more expensive than competitive products.

The abuses in the wrap fee programs are even worse. They are charging fees as a percentage of assets under management, just like I do. However, rather than getting the best price on an open market, they often sell clients stocks and bonds from their firmís inventory, and without disclosing this conflict of interest. I have often seen multiple purchases of very small lots over just a few days instead of a single purchase equal to the total number of shares purchased, which often do not represent the best price available on the day of purchase.

In one case I saw multiple trades for a client who was in an Alzheimerís unit, and had not made a single phone call to the broker. Yet almost every trade was marked "unsolicited." In another case, the broker sold an advisory client a huge bond position in a company just a few days before the company went bankrupt Ė without disclosing the risk, even though the investment industry was well aware of the companyís financial problems.

They canít have it both ways. If they hold themselves out as financial planners and advisors, and if they charge a fee for a financial plan or a percentage fee for their managed accounts, then they should be held to the same fiduciary standards for fairness, disclosure and oversight that we advisors are held to. If they are not investment advisors acting in a fiduciary capacity, they should be prohibited from advertising and labeling themselves as financial advisors and planners. They should call themselves the brokers that they are, and make sure clients understand the difference.

Roger Russell, CFP
Regional Director
Financial Network Investment Corporation
PO Box 8 * 1807 E. Main Street
Cottage Grove, OR 97424
Phone: 541-942-5535
Fax: 541-942-8151