August 26, 2010
The suitability standard governing broker-dealers and registered representatives is a robust and heavily enforced standard. Compliance costs-both in terms of finances and time-are high, and those costs are eventually felt by clients. Adding another layer of regulation means another layer of compliance, and even more cost to clients. There is a great deal involved with receiving licenses, (i.e. Series 7, 6, 63, life/health etc..) which also entails numerous continuing education hours to continue to hold these licenses, not to mention the great deal of time and effort to be compliant on every transaction made. For each security transaction/client meeting there is a great deal of time involved preparation/research, meeting with client, fact finding discovery, suitability of transaction, and all paperwork involved can be anywhere from 4-8 hours spent per client and transaction. In order to keep up with the amount of time doing compliance paperwork involved you are forced to hire someone so the advisor can be able to serve and spend time with their clients. The increasing amount of compliance requirements has a direct impact of how much time can be spent with clients to provide the service they deserve. The clients will suffer because of it. The liabilities of a fiduciary duty could mean higher costs and limit my ability to serve my clients to the highest efficiency. Liabilities will drive up errors and ommissions. This all could mean too high costs to continue to stay in business, clients could lose the financial guidance and advice, and the staff employed by the advisor could lose their jobs.