June 28, 2018
To Whom It May Concern -
As a holistic, fee-based financial advisor and author of the soon-to-be-released book entitled, Success As A Financial Advisor for Dummies (Wiley, 2018), I'm excited and encouraged by this proposal. Titles matter in any profession. They define professional members who have met a specific criteria, giving consumers a reassuring validation on experiencing a certain standard of care.
Doctors and attorneys have "MD" and "JD", respectively, to signify their professional education, while additional licensing and registration at state levels permit them to practice. Unfortunately, financial advisors do not have just one or even two suffixes to identify their professional standing, but hundreds (the top 150 are listed through FINRA's website). With so much suffix variety, a unique title for "true" financial advisors would carry more weight.
However, your proposal can go further to eliminate confusion for investors. The main challenge regarding dually registered individuals (Registered Representatives and Investment Adviser Representatives), where toggling between sales rep suitability (for a variable annuity product) and fiduciary standards (for discretionary asset management), is that it's practically impossible to do so clearly without point-of-sale (POS) red-letter language that must be signed. An example of a POS red-letter language for a dually registered individual would include the shifting standard of care description, followed by the related compensation amounts and conflict disclosures, should the sale occur from an individual with the umbrella title of financial advisor. Should a financial advisor not want to disclose the specific associated compensation or conflicts from a transaction, then they may not use the title of financial advisor, at any time.
To further complicate matters, many financial advisors are also engaged in insurance product sales. These sales are subject to different suitability standards than set forth by FINRA, and even further away from a client-desired fiduciary relationship. A financial advisor who sells an insurance product today does not have any explicit obligation to disclose any conflicts or compensation, and depending on product type these may be poorly disclosed in a densely worded legalese document. For the title of "financial advisor" to have the full weight and significance that this proposal would ultimately intend, the SEC should extend the use of "financial advisor", and its related responsibilities, to all transactions that such a titled professional would engage.
In short, if someone has "financial advisor" on their business card, then the public should expect that this professional would disclose all compensation earned through any and all of their advisory service or product sales recommendations, regardless of financial product type. Consumers would then be able to recognize how a "financial advisor" is different from any another moniker in the marketplace. And by ruling such distinction, the SEC would have made significant gains to the investing public's confidence in our financial markets and its constituents, making it easier to find professionals who are not afraid to reveal all material factors.
Humbly Submitted For Your Consideration,
Ivan M. Illan, CFS
Founder CIO
Aligne Wealth Preservation and Insurance Services, LLC.
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