Subject: Public Comment Letter on the SEC Advice Rule and Separating Advice from Sales
From: Michelle Underwood Gass
Affiliation: Paradigm Advisors LLC

August 7, 2018

Dear SEC:

RE: S7-07-18 for Regulation Best Interest
S7-08-18 for Form CRS/Titles comments
S7-09-18 for the RIA Harmonization proposals

The proposed rules as written, are in conflict with the underlying mission of the regulatory authorities.  Accredited Investors and Qualified Purchasers have a significantly higher level of protection under SEC regulation than smaller, less sophisticated consumers.  According to documents provided by the SEC, “fees earned by the hedge fund manager, expenses charged to the hedge fund and the hedge fund manager’s potential conflicts of interest” are required to be disclosed - https://www.sec.gov/investor/alerts/ib_hedgefunds.pdf.  It is completely illogical that a ‘financial advisor’ is not required to disclose fees and conflicts of interest to all interested parties 100% of the time.

Over the past few years, language and terminology within in the financial advisory world have become extremely murky and confusing for innocent consumers.  Today, we no longer have stock brokers or insurance agents…instead these salesmen have self-identified as “financial advisors”.  There are no requirements for calling yourself a financial advisor.  Unfortunately, consumers often falsely believe that financial advisors are acting in a fiduciary capacity. 

Based on the recent proposals, the lines are being blurred further.  The SEC ‘s most recent proposals fuel this misunderstanding by allowing representatives to switch from fiduciary to non-fiduciary with the tip of a hat.  Brokers can alternate between being a fiduciary and a salesman via the ‘hybrid’ rules.  Even more alarming, there is no requirement to notify the consumer that he/she is no longer acting in the best interest of the client.   As a result, the vulnerable consumer is totally unprotected.

At a minimum:

• Any and all compensation received directly or indirectly should be disclosed to the consumer when they are sold any products. 

• Only those representatives acting in a fiduciary capacity 100% of the time should be allowed to identify as Financial Advisors. 

• Conflicts of interest and fees charged should be disclosed at all times, not just when a representative chooses to be wearing the fiduciary hat. 

Respectfully submitted,

Michelle Underwood Gass, CPA, CFP®
Founding Principal

Michelle Underwood Gass, CPA, CFP®
Paradigm Advisors LLC
[redacted]
www.paradigmadvisors.com

Dallas office: 8117 Preston Road, Suite 725
Dallas, Texas 75225

Fayetteville office: 102 East Sunbridge, Suite 2
Fayetteville, Arkansas 72703