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November 01, 2005 at 02:00 AM
Michael Sandifer raised some interesting points in his October letter. Acting like a fiduciary and agreeing in writing to serve in a fiduciary capacity are two entirely different things. As anyone who’s taken the time to read a standard brokerage agreement knows most such agreements require the customer to forfeit his/her ability to sue and force any dispute short of outright fraud into arbitration. This is an escape hatch that simply isn’t available to those serving in a fiduciary capacity. The contention that the regulatory and licensing environment of the brokerage industry is equivalent to a fiduciary standard of care is specious at best.
Interestingly, neither the brokerage industry nor their lobbying arm (Securities Industry Association) make the case that a broker’s suitability standard of care is a higher standard than a fiduciary standard of care. The FPA’s efforts as it pertains to the Merrill rule aren’t about determining what constitutes a “true advisor.” It is an attempt to hold all financial professionals providing “advice” (as defined under the 1940 Act) to one uniform standard of care. How can anyone argue that applying a lower standard of care better serves the investing public?
Michael H. Palmer, CFP
Principal
The Trust Company of the South
Raleigh, North Carolina
Making It Alone
Thank you for your article, “Can’t Tell a Book” (Clark at Large, September 2005). I have long thought that much of the data in these reports is biased, but never knew how.
I got started in this business just over three years ago and opened my own fee-only RIA (I had no background in the industry prior to this). I work part time and now have about $40M in AUM generating about $350,000/year. I have no staff and my expenses are very low (in fact I am trying to find business expenses to have write offs!). My annual client satisfaction surveys suggest my clients are extremely happy with my service. This is borne out by the fact that I have never spent a dime on marketing (other than on my Web site) and 100% of my clients come from referrals.
