Mar. 8, 2023
To whom it may concern, My name is Dennis Markway and I am the owner of a small, fee only SEC registered investment advisor located in Iowa, and I would like to share my perspectives on the Proposed Safeguarding Rule. This opinion is informed by decades on all sides of the financial services world - from RIA to Broker Dealer to Insurance Company management. It is also informed by my experiences providing expert testimony in financial malfeasance cases, volunteer work with the Disciplinary and Ethics Commission of CFP Board as well as consulting on cases with insurance companies and the Iowa Insurance and Securities Division. While I applaud efforts to protect consumers and expand the defined assets to include crypto, private placements, etc - there is a misguided section of the proposed regulations that seems to be off the mark - namely, expanding the definition of custody to include discretion on client accounts. Our clients contractually grant us discretion in their agreement with our firm and doubly have to grant those specific power via paperwork with the qualified custodians we work with (TD, Schwab, Fidelity and Axos). While discretion does expose consumers to additional risk of potential mismanagement or exposure to market risk, it certainly does not rise the the risk level of commingling assets or have custody of clients' investments. Where there have been high profile thefts of client assets, custody has been the central issue. These are apples and oranges issues. And a finer distinction between those risks and relief available for those risks is warranted. As for relief for consumers where an advisor has abused his or her discretionary powers, there is already relief available to consumers in the form of mediation, arbitration and litigation. And the specter of unlimited personal liability for our recommendations is sufficient punishment for misuse of those power (not to mention the work we put in with rounds of testing portfolio updates prior to implementation, reviewing/documenting alignment of the allocation with consumer goals/objectives, third party peer reviews we conduct with external CFAs for portfolios to attribution testing to identify allocation or holding concerns). Not to mention that we volunteer for an annual audit with our external compliance counsel. (We are chronic rules followers . . . and while an audit is never my idea of a good time, we find it is in the best interest of our clients to have our business scrutinized regularly as state and federal rules change quickly). While I hope my firm is not a unicorn, we take our fiduciary duties and obligations to our clients as serious as possible (I have the grey hairs to prove it). So, in my humble opinion, discretion does not rise to the risk level of custody and there are ample consumer remedies available under current rules for breaches of duty as it relates to discretion abuses. Should you have any questions or wish to discuss this (although I'm sure you're receiving ample feedback), I would gladly spend the time in conversation. Feel free to call me anytime on my cell 515-779-6250. Sincerely, Dennis L. Markway, CFP(r) CEO, Iron Horse Wealth Management, LLC