August 3, 2018
It is time that the SEC live up to its mission and protect investors. The proposed Best Interest Rule fails to accomplish this. It is vague, and will do little to change and industry that is based on a culture of sales, whose financial interests are not aligned with their customers. It is time for the SEC to adopt a universal fiduciary standard, and hold those managing a significant portion of the wealth of this country to act solely in the interest of their customers.
Ive seen firsthand how broker dealers take advantage. My parents held an account with one. After running up 3% to 4% of AUM in transaction fees, when a fixed trading program of 1% could have been implemented. Buying and selling full load mutual funds in the same fund family for thousands of dollars in fees when a free NAV transfer could have been initiated. Keep the trade volume to 1/3 of the account so it was just shy of churning. And Ive heard FINRA respond with your parents did not lose money, so we gave the broker a warning. The thousands of dollars in excess fees were never reimbursed.
I figured maybe this was a one off story. So I began telling friends, who come back with something similar happened to my mom, my dad, my in-laws. All believed that their broker was acting in their best interest until it was too late.
Everything else is aligned against the small investor: commission structure, forced mediation, and self-regulation. The only way for the culture of sales to change is to adopt the fiduciary standard.