June 28, 2018
Gentlemen:
I have read your proposed language for SS-08-18 Appendix C, D and E. I believe each Appendix to be wordy, confusing and misleading.
Relationships and Services
· You equate asset-based fee with an Investment Advisory Account. For wire-houses they provide an asset-based fee in lieu of commissions, not for ongoing advice. Your wording is very confusing and not accurate.
· “We offer a limited selection of investments” is so vague it is meaningless. As an RIA, we can access all publicly traded investment products, just not proprietary investments.
Our Obligations to You.
· For an Investment Advisory account, you do not define what a Fiduciary standard is. For a brokerage account you make it sound like there is a fiduciary standard. Your wording is extremely confusing and does not differentiate the two standards.
Fees and Costs
· Brokerage accounts can be offered with transaction based fees or asset based fees. Investment Advisory Services can be offered as an asset-based fee or a fixed fee. Your wording is not accurate and confusing.
· Your wording on a wrap fee program is inaccurate and misleading. Clients’ can pay asset-based fees and NOT a wrap fee, particularly for accounts that are not traded frequently or unitize Non-Transaction Fee investments like certain ETFs. Your wording suggests that an asset-based fee and wrap fee go together and the alternative is separately buying advice and using a brokerage account. This is simply not true.
Conflicts of Interest
· This section is very confusing. While I agree that fee-sharing arrangements and referral fees need to be disclosed, your wording is confusing. Additionally, as an RIA, I never act as a principal on a trade so it would be misleading to make such a statement.
Additional Information
· Why state “we have legal and disciplinary events” when we have no complaints or other disciplinary issues on our record? This is very confusing and misleading.
Key Questions to Ask
· The issue is not whether to choose a brokerage account or a fee-based account. The issue is what type of advice the client wants (continuous or periodic) and whether they want a professional with a Fiduciary Standard or merely a standard of care. This is not explained in your document nor in the KEY QUESTIONS TO ASK.
I respectfully submit to you my opinions and comments and hope that you will consider them.
Mary Margolis, CFP, CPA*/PFS