Compensation disclosure is in clients’ best interests

I read “Finra’s broker comp proposal raises hackles” (InvestmentNews.com, March 5).

The broker-dealer industry doesn’t want to disclose brokers’ compensation? I am shocked.

Can someone please tell me what they do want to disclose?

Both the National Association of Insurance and Financial Advisors and the Securities Industry and Financial Markets Association asserted “that recruiting bonuses do not always present a conflict of interest.”

If that is truly the case, then what is the problem with disclosing it?

In a March letter, NAIFA’s vice president for securities and state government relations, Gary Sanders, wrote, “The fact that certain incentives were received by the registered representative in connection with such a move should not, in and of themselves, call into question the motivation behind such a move or serve as an indication that any such move was made for any reason other than the best interests of the representative’s clients.”

This is completely false. I have been in this industry for more than 25 years, and I challenge any broker who took a “deal check” to honestly admit that they did it for their clients and not themselves.

That isn’t how this industry works.

If I am wrong, then they should have no problem disclosing not only any conflicts of interest to their clients but also how much they got paid to switch firms, what their bonus will be predicated on, what percentage of their clients’ assets they retain, as well as any production bonus or increased payout that they may receive while on their “deal.”

Hey, it is all in the best interests of their clients, right?

John M. Nowicki

President

LCM Capital Management Inc.

Chicago

Thanks for the article “Black pols oppose fiduciary rule” (InvestmentNews, April 1) about the Department of Labor’s fiduciary standard with respect to the Employee Retirement Income Security Act of 1974.

I am an African-American financial adviser, and I hold the accredited investment fiduciary analyst designation.

After reading this article, I disagree with members of the Congressional Black Caucus on this issue. I don’t think that by requiring a fiduciary standard, more African-Americans will exit the investment business.

What may result in fewer African-Americans in this business is simply whether firms are proactive with their targeted-recruiting efforts. This includes independent firms taking a look at their practices, and if they don’t reflect a healthy representation of investment professionals who are African-Americans, making a commitment to hire an African-American financial planner, investment adviser or registered representative.

In a March 15 letter to acting Labor Secretary Seth Harris, which was quoted in the article, the eight House members who are also members of the caucus wrote: “If brokers who serve these accounts are subject to [ERISA’s] strict prohibitions on third-party compensation, they may choose to exit the market rather than risk the potentially severe penalties under ERISA for violations. If that occurs, it could cause IRA services to be unattainable by many retirement savers in the African-American community.”

IRA services would still be attainable by retirement savers in the African-American community. Im-posing a fiduciary standard wouldn’t prevent retirement savers from contacting an insurance or brokerage firm and inquiring about opening an individual retirement account.

Many financial services professionals are dually licensed. Therefore, I think that advisers would simply make the switch to “fee-based” compensation over commissions if the Labor Department proceeds with imposing the fiduciary standard.

Otherwise, I don’t see how such a standard would result in a greater impact on African-Americans.

Martin A. Smith

President

Wealthcare Financial Group Inc.

Bowie, Md.

Related Topics: Letters To The Editor