Subject: S7-0818
From: Drew Tignanelli
Affiliation:

Jul. 31, 2018

To The Honorable Chairman Clayton,

May I share my story with you to express why our country is in need of change in regards to the rendering of personal financial advice?

• I have been in this business 39 years as of this week in 1979 and originally was an insurance agent and a stock broker. I sued Financial Planning to merely sell product to clients
• No one taught me about investments, tax planning, risk management, estate planning or all the necessary ingredients to be a true professional advisor, but I was promoted as a financial advisor. This is still true with new advisors at brokerage, banks and insurance companies.
• I pursued the Certified Financial Planner credential and later the Certified Public Accountant and realized despite my credentials I was still nothing more than a sales person.
• In 1995 I began to take a major course change becoming a fee only financial advisor and dropping all sales licenses. This forced me to deliver high quality advice as opposed to the sale of product.
• Becoming fee only placed me completely under the liability of a fiduciary in all my client activities. I could no longer hide behind the suitability standard of a broker or caveat emptor of an insurance agent.
• I was a good person before being fee-only and was not dishonest, but I became a great financial advisor when I forced myself under the proper professional guidelines.
• America’s financial disasters in my career could have been avoided if the country forced anyone holding themselves out as financial advisors to be fee-only, credentialed, experienced, and independent of product providers and a full time fiduciary as defined by law.
• That is a bold statement, but easily supported. In the 1980’s the tax shelter limited partnership fiasco was solely built on sales by commission based brokers. Which then led to the S&L collapse.
• The High yield junk bond world of Michael Milken was kept alive by sales from brokers claiming to be advisors.
• The Dot Com boom of 2000 was fueled by mutual fund sales and the housing bubble of 2008 was propelled by the sale of Collateralized Mortgage bonds, commissions to Real Estate Agents and brokerage firms playing both sides of the game.
• My fee-only colleagues and I were well ahead of the siren that these were bubbles and dangerous to their clients well-being.
• My colleagues and I are not hired to sell products and are not trained in sales; they are hired to advise clients and are trained in finance and in advice, and have the CFP®, CFA and CPA designations.
• We minimize conflicts by only receiving compensation from client fees; We do not accept commissions or other third-party payments in connection with recommendations.
• The fees and the underlying investment costs clients pay are transparent and clear. We offer estimates and annual reports of fees and expenses. There is no confusion: Clients know what they've paid and what we earned.
• All material conflicts are clearly listed on the ADV, but to merely hold brokers to that ADV standard as proposed is not enough.
• IF you want to sell product then be an insurance agent or a broker and hold yourself out as an Insurance and investment sales person. If you want to give advice then be a professional the public can count on who is independent, fee-only, credentialed, experienced and works solely as a fiduciary.

With the elimination of Defined Benefit Pensions and Social Security in need of long term repair the public has a critical need for professional unbiased advice. The time for professional advisors is necessary now and If not now, then when. President Obama tried through the Dept. of Labor that was unworkable in reality and only covered retirement assets. Today the government has the best opportunity to develop personal financial advice into a profession which makes our country financially stronger and less susceptible to overly exaggerated sales products designed to manipulate and earn product people money at the expense of unwitting clients. We did this with medicine, legal services and accounting. Where would our country be if these practices were not professionalized? Chairman Clayton you have the power to create a profession that is a legacy worthy of your service. I know the special interest are very powerful, but it is their greed and not concern for their employees that drives them. Their sales people who desire to could easily transform into true professionals. I did in 1995 and they too can.

The financial wellbeing of our nation rests in your hands and I urge you to consider creating personal finance into a declared profession like doctors, lawyers or accountants that are worthy of the public’s trust. America’s future retirees are dependent on sound advice and that will not come from commissioned sales. I say this from my own personal experience.

Thank you for your service,

Drew Tignanelli
July 31st, 2018 (my 61st birthday today!)

Andrew V. Tignanelli, CPA CFP®
President
The Financial Consulate, Inc.