Author Archives: Merrijoy Vicente

Chicago Tribune: Know your options before investing in an adviser

In the Chicago Tribune, Gail Marks Jarvis stresses the need for investors to ensure that their financial planner is held to ethical standards and provides financial planning services pursuant to a fiduciary standard of care.

Excerpt: It’s a typical reaction: You don’t think you have the slightest idea how to invest your money for your future, so you figure you’ll go to an expert and get it right.

The trouble is that the investment business is full of conflicts of interest. And naive individuals, who go blindly for help, often end up getting dinged in the process. The more you need help, the more chance you will get taken.

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U.S. News & World Report: When Salespeople Call Themselves Advisors

Jim Lardner of Americans for Financial Reform discusses the challenges investors face when working with advisors who do not have investors’ best interests in mind, often recommending investments that will generate more money for themselves.

Excerpt: Saving for retirement is extra-hard these days, and not just because wages are low and millions of Americans are still struggling to make up for ground lost after the 2008 financial crisis. All too often, the difficulty is compounded by gaps in the rules for the financial professionals who provide retirement-planning advice.

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Financial Planning Coalition Statement on SEC Oversight Hearing

Washington, D.C. – The Financial Planning Coalition – comprising Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association® (FPA®), and the National Association of Personal Financial Advisors (NAPFA) – issued the following statement in response to Securities and Exchange Commission (SEC) Chair Mary Jo White’s testimony during today’s House Financial Services Committee SEC Oversight hearing:

“The Financial Planning Coalition is gratified that Chair White and the SEC continue to make the consideration of a uniform fiduciary standard for broker-dealers and investment advisers a high priority. But the time for action in the name of investor protection is now. We urge Chair White and the SEC to heed the recommendations of investor advocates, adviser groups, and the major broker-dealer trade association, as well as its own Investor Advisory Committee, and proceed with this much-needed rulemaking under Section 913 of the Dodd-Frank Act.”

“In addition, the SEC’s current inability to regularly examine registered investment advisers needlessly exposes investors to greater risks of fraud and abuse. Authorizing the SEC to collect user fees from advisers is a pragmatic and cost-effective solution to fill the gap in the Commission’s funding, and we call on Congress, beginning with the House Financial Services Committee, to make this a reality.”

Throughout the SEC’s deliberations on these matters, the Coalition has sought to be a resource, including most recently documenting the clear harm to investors caused by the absence of a uniform fiduciary standard. The Coalition agrees with Chair White that if the Commission is to fulfill its mission to protect investors, it must be adequately funded to effectively examine SEC-registered investment advisers, who manage approximately $48 trillion of American investors’ assets each year. We are committed to working with the SEC, Congress and all interested parties to restore trust in our capital markets through the appropriate regulation and oversight of those who provide financial advice to American investors.

Uniform Fiduciary Standard For Providing Investment Advice is Needed to Protect Investors From Harm

Members of the Financial Planning Coalition, with other “Friends of Fiduciary,” renewed their call for the  SEC to move forward with rulemaking on the uniform fiduciary standard in a joint letter to the five SEC commissioners, providing evidence from academic research, market analysis, and observation of industry practices to illustrate the harm to investors that results from the lack of a fiduciary standard.

Washington, D.C.– Documenting the harm to investors resulting from gaps in the rules governing investment advice, investor advocates and industry representatives  are renewing their call for the Securities and Exchange Commission (SEC) to better protect investors by establishing a uniform fiduciary standard of conduct consistent with Section 913 of the Dodd-Frank Act.

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Uniform Fiduciary Standard For Providing Investment Advice is Needed to Protect Investors From Harm

Members of “Friends of Fiduciary” Renew Call for SEC to Move Forward with a Rulemaking;
Major Benefits for Investors Seen From Fiduciary Standard,
While Alternatives Leave Much to be Desired

WASHINGTON, D.C. – April 15, 2014 – Documenting the harm to investors resulting from gaps in the rules governing investment advice, investor advocates and industry representatives are renewing their call for the Securities and Exchange Commission (SEC) to better protect investors by establishing a uniform fiduciary standard of conduct consistent with Section 913 of the Dodd-Frank Act.

In a joint letter addressed to the five SEC Commissioners, the groups provided empirical evidence from academic research, market analysis, and observation of industry practices that illustrates the harm to investors that results from a regulatory system that allows brokers to offer investment advice under a conduct standard appropriate to a sales relationship rather than an advisory relationship. Signatories to the letter include AARP, CFP Board of Standards, Consumer Federation of America, the Financial Planning Association, Fund Democracy and the National Association of Personal Financial Advisors.

In their joint letter, the groups wrote:

“The bifurcated approach to regulating investment advice offered by broker-dealers and investment advisers reflects the failure of regulatory policy to keep pace with changes in market practices. There is no justification for applying different standards of care to financial professionals who are offering the same services to investors. Over the years, broker-dealers have not only identified themselves as financial advisers, but they have offered virtually identical services to investors in order to compete. The Commission has permitted, at least tacitly, this evolution by failing to apply the appropriate regulatory standard.”

“Investors suffer concrete harm — in the form of higher costs and poorer performance – as a result. The Commission has an opportunity to reduce this harm to investors without imposing undue costs or regulatory burdens by applying a fiduciary standard to both broker-dealers and investment advisers when they offer personalized investment advice to retail customers. We urge the Commission to move forward expeditiously with a rulemaking, consistent with Section 913 of the Dodd-Frank Act, to achieve this goal.”

In addition to debunking any notion that a fiduciary standard will somehow prove injurious to investors, the letter notes that advice offered by a broker-dealer in a non-fiduciary capacity can significantly erode long-term investor returns: “As the Commission warned in a recent bulletin for investors, ‘[o]ver time, even ongoing fees that are small can have a big impact on your investment portfolio,’ reducing returns, shrinking a nest egg, and preventing investors from achieving financial goals. This impact was illustrated in an October 2013 Bloomberg Markets Magazine report on data filed with the SEC which showed that ‘89 percent of the $11.51 billion of gains in 63 managed-futures funds went to fees, commissions, and expenses during the decade from Jan. 1, 2003 to Dec. 31, 2012.’ Brokers have an incentive to keep clients in managed-futures funds because they receive annual commissions of up to 4 percent of assets invested and investors pay as much as 9 percent in total fees each year.”

The groups also note that the absence of a fiduciary standard allows brokers to sell products with substandard features, which may be suitable but not in the client’s best interest. Additionally, a broker-dealer’s reliance on a suitability standard instead of a fiduciary standard unfairly limits an investor’s options when seeking legal redress against their broker-dealer, according to the groups.

Significantly, the groups also note that there is no evidence to support the contention by some that better disclosure and enhanced investor education alone will offset the harm American investors suffer in the absence of a uniform fiduciary standard that is applicable to both broker-dealers and investment advisers when providing personalized investment advice to retail customers.

MarketWatch: Is your adviser working in your best interests?

Lisa Hay, CPA, president and founder of Ascend Financial, LLC, shares the benefits of fiduciary financial advice and the most accurate way to tell if the adviser you are considering is acting in your best interest.

Excerpt: Many consumers are beginning to realize the benefit of fee-only fiduciary financial advice, but they don’t know how to tell if the adviser they are considering is actually fee-only. If you are smart enough to realize that working with a fiduciary is very important, and that how your adviser is compensated matters, read on.

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