July 20, 2018
1. Overall, do you find the Relationship Summary useful? If not, how would you change it? If so, what topics and how can they be improved?:
Yes, it's useful as a good start, but it omits another form of structure of relationship: a brokerage (broker-dealer) account that is BOTH commission-based AND discretionary. This would probably be relatively rare, but in fact it's exactly what my wife and I (and one friend) have been looking for over the past several years. We consider AUM-based fees as extortionate in that under that format we would have to pay an ongoing substantial fee (1% of assets) every year on assets that we have accumulated by ourselves (self-managed through a discount broker) and that the broker had no hand in achieving. AND, in the case of long-term holdings, we'd be paying a "fee" every year for mere custodial services. Ultimately we have recently found a broker and firm who do "offer" AUM-based fee discretionary accounts, but in addition to that they've (readily) agreed to start a relationship of a commission-based NON-discretionary brokerage account which, if WE so choose to do later on, we can by mutual consent change to a discretionary account if we are pleased with the service. Now THAT's fiduciary responsibility in action Over the years, our experience has been that AUM-fee-based accounts that are discretionary are largely algorithm-based boilerplate, with the "financial advisor" usually a providing a marketing and handholding function with very little customer service beyond various "perks" for the client like free tickets and meals.
2. How useful is each section of the Relationship Summary? Please consider explaining your responses in the comments:
a. Type of Relationship and Service: Useful: See above. The Summary is clear, concise, educationally effective, and a big step forward. I think it's incomplete in one respect as I've outlined above.
b. Our Obligations to You: Very Useful: Good job. Plain English, which is a blessing
c. Fees and Costs: Very Useful: My (prospective) broker already does this on the ADV-2: refreshing to read. I found Fidelity's ADV-2 tedious, exhausting, and obscure...probably accurate, but very difficult to extract the information I needed.
d. Comparison to different account types: Useful: Just not complete, as above.
e. Conflict of Interests: Very Useful: Every structure has built-in "incentives" (a euphemism to be sure). Most customers (including medical patients) squirm uncomfortably about this and don't want to hear much about it (just try asking a patient to discuss with a dentist the economics of a dental implant, or cost-benefit tradeoffs of different materials in making a crown, or the real benefits and side effects of prostate cancer interventions). Patient and customer/client aversiveness and contributory evasions are part of the problem.
f. Additional Information: :
g. Key Questions to Ask: Very Useful: But how do you get the client actually to ASK
3. Please answer the following questions. Please consider explaining your responses in the comments:
a. Do you find the format of the Relationship Summary easy to follow?: Yes:
b. Is the information in the appropriate order?: Yes:
c. Is the Relationship Summary easy to read?: Yes:
d. Should the Relationship Summary include additional information about different account types?: Yes: See above
e. Would you seek out additional information about a firm's disciplinary history as suggested in the Relationship Summary?: Yes: I've done so. It's easy to get SOME such information (e.g. BrokerCheck at FINRA) but even that isn't complete (e.g. what the FIRM did vs. the broker). You have to dig at least into the ADV-2.
4. Are there topics in the Relationship Summary that are too technical or that could be improved?:
Nope, it's clear
5. Is there additional information that we should require in the Relationship Summary,such as more specific information about the firm or additional information about fees? Is that because you do not receive the information now, or because you would also like to see it presented in this summary document, or both? Is there any information that should be made more prominent?:
Sure: have you or the firm ever paid any fines, settlements, judgments or the like (if so, when, why, what, how much)? Has your license ever been suspended or revoked or limited in any way by any organization (if so, when, why, what, how long)?
6. Is the Relationship Summary an appropriate length? If not, should it be longer or shorter?:
Well you don't want it to be exhausting boilerplate. You want to keep it in plain English (or Spanish).
7. Do you find the 'Key Questions to Ask' useful? Would the questions improve the quality of your discussion with your financial professional? If not, why not?:
Tell me in plain language exactly how you are going to formulate individual, custom (not "customized") recommendations for me, who else is going to contribute to the plan (and what and how), and what the goal is...so that I can match your actions (or recommendations) to a specific effect that matters to me and understand how things got that way. What benchmark matters to me?
8. Do you have any additional suggestions to improve the Relationship Summary? Is there anything else you would like to tell us?:
Good luck