Jul. 31, 2018
The Honorable Jay Clayton
Chairperson
United States Securities and Exchange Commission
Rule-comments@sec.gov
Email subject line: S7-0818
Dear Mr. Clayton:
I am sending this email to express concern about the Best Interest rule for brokers as proposed in Appendix D of your revised rules. Registered Investment Advisors regulated at the federal or state level are required to act in a fiduciary capacity. As an hourly rate fee-only financial planner and state registered Investment Advisor, that has been my career goal for three decades and continues to remain my first priority. This means I can encourage clients to hold cash if that best meets their needs and risk tolerance in a changing market, buy a second home, help their adult children or give generously to charity because their needs/wants always come first.
This does not negate a role for brokers or sales professionals in the marketplace. It simply means they must honestly describe their role so all clients and prospects are dealing with the facts. There are many individuals who choose to remain in full control of all investment decisions and will happily choose a salesperson from whom to purchase an investment product. When an individual attempts to make a direct purchase of an investment product, they need to understand what they are buying just like when they buy a car. The car salesperson clearly represents the dealership so the buyer must research choices independently if they want objective information.
I suggest that the key to transitioning to the Fiduciary Rule is “Truth in Advertising” with clear and simple explanations of the services provided and how payments are made. The Hypothetical Relationship Summaries in Appendix D and E of your proposal do not clearly define the role of Investment Advisors or brokers. The Investment Advisor form does not even identify hourly rate or retainer fees as possible for these professionals. It also ignores fee differences that can exist between stock and bond accounts etc. The broker should not be asked the same key questions when the services provided differ from those of Investment Advisors. Both need clarification and rewording to distinguish between them rather than make them seem similar. Then it becomes the responsibility of the individual investor to get educated in the real jargon of the field and how to make informed choices
Marge Schiller
M. K. Schiller Consulting