Like you, I was a very young lad when I first heard the story of the little boy who cried wolf too many times. The concept stuck. So, I don’t very often ring an alarm bell. As a staunch consumer advocate, however, I really need to bring this issue to your attention. I have watched the giant brokerage houses fleece consumers for decades, and made offering you and them alternative more than my business. It is my life’s calling.
Well, over the past twenty years, more and more of my peers have seen the light and joined me as independent Registered Investment Advisors, governed by the fiduciary requirements of the Securities & Exchange Commission under the 1940 Investment Advisors Act. So many, in fact, that the giant brokerage houses are losing brokers and their clients along with them – enough for them to cry Uncle.
Naturally, the Uncle to whom they are crying is Uncle Sam – specifically the men and women who occupy the U.S. House of Representatives and Senate, and who depend upon their largess to fatten their re-election campaign coffers. They want them to take oversight of RIAs away from the S.E.C. and give it to them. So much for consumer choice.
The following letter was drafted by the National Association of Personal Financial Advisors (NAPFA), an organization of Certified Financial Planners who requires of its members a fiduciary oath to their clients that prevents them from selling financial or insurance products or being affiliated with any company that does. They are the single purest advocate you and I have for being able to obtain financial advice that is not tainted by the conflicting interests associated with product sales.
Please take a few minutes to read their letter and, if you are of the mind to, take the action they suggest. Once the giant brokerage industry gains control over fiduciaries, I am confident the end of pure client-oriented advice will follow.
Oppose the Investment Advisor Act of 2012 – HR 4624 (from NAPFA)
Powerful House Financial Services Chairman, Spencer Bachus is holding a hearing next week on a bill that will hurt small business owners who provide sound financial planning to consumers and who put their clients’ interests first. We should be alarmed and we should be furious that this bill would allow the foxes to rule the hen house. HR 4264 would strip advisor examination and oversight from the SEC (Securities and Exchange Commission), a government entity that has worked with registered fiduciary advisors for 70 years, and place them with a non‐government organization called FINRA (Financial Industry Regulatory Authority), who oversees the Wall Street stockbrokers who created products so confusing and with such outrageous commissions that consumers had little idea what they were being sold.
Your advisor takes the Fiduciary duty to consider your interests first very seriously. The Fiduciary Standard is a funny term, but that’s what it means: you get planning advice from your advisor that is in your best interest. Not so with Broker‐Dealers. They can sell you a product that pays them a high commission with murky fees and skip the product that doesn’t. That’s called a Suitability Standard. They are both legal terms. Hard to believe it – we can’t make this stuff up.
Where is the logic in allowing a big business organization with the lower standards like FINRA to oversee the independent small business owners with the higher standards like advisors? Where is the logic in allowing for FINRA to obtain a stranglehold over advisors by charging huge annual registration fees and create a hornet’s nest of rules that would make sound advice by independent advisors nearly impossible to economically provide? It only makes sense if you want to limit transparency and accountability but expand conflicts of interest.
Here are a few more details:
– FINRA’s exorbitant operating expenses and bloated salaries make them more Wall Street than Main Street.
– FINRA’s mandatory membership fees will put some advisors who offer advice to middle‐class savers out of business
– The burden of making small businesses pay mandatory fees to fund FINRA salaries is unconscionable.
– FINRA is not subject to Sunshine Laws and doesn’t have to hold open meetings.
– FINRA is not subject to the Freedom of Information Act, and is notoriously secret about their books and records.
– FINRA is an organization of Wall Street executives who oversee Wall Street brokers.
– FINRA has no experience working with advisors held to the high fiduciary standard.
– FINRA can act like a government authority without government accountability.
If you want to do something about it, you can call your Congress Member’s office today and voice your opposition the HR 4624 by http://r20.rs6.net/tn.jsp?e=001tCKMOHXFEne1jznJnHzjiSfES7YbSMqPzmx7eyLcOzBVkhjSW0Ug8pGg-iWJGjW2qZSGNXjcEeNWYg-g36oNMHi8Z_jNROKUUTzNSrbLNTDiWv8dA4KTqjv8R5Cn7W4t. All you have to do in put in your zip code and you will be directed to your contact info for your Congressional office.
It could be as simple as saying the following, or drawing from the bullet points above:
“As a constituent I would like to voice strong opposition to HR 4624. Small businesses will suffer or fail if their oversight is outsourced to a non‐governmental organization like FINRA.
Please stand for transparency and accountability. I am also disturbed that FINRA is not subject to Sunshine Laws or the Freedom of Information Act. Thank you for your time.”