Investors are telling the Securities and Exchange Commission that disclosure forms included in the agency's investment advice reform package should make fees more transparent.
In
investor roundtables in Houston and Atlanta in June, some participants reviewed the proposed four-page
client relationship summary and found they wanted more information about how much they would be paying their financial adviser.
An investor at the Houston event questioned whether what he wanted to know about fees could be conveyed in the summary.
"Why shouldn't brokerages and advisory firms have the ability to take a transaction, one account, and outline: These are going to be the fees that you will either incur at the time of closing the transaction, ongoing or at sale?" asked one participant. "Why is it too difficult to do something like that? And it's not something you can do on a four-page document."
The so-called Form CRS is designed to give investors a summary of the differences between investment advisers and brokers in terms of their services, the standards of conduct they must meet and the way they charge fees.
Form CRS is meant to start a conversation between a potential client and a financial adviser, not provide all the answers, Dalia Blass, director of the SEC Division of Investment Management, said at the Houston roundtable.
"To answer your question about what is missing, that's a question that you can ask," Ms. Blass said to one participant. "The form is sort of broad brush, in terms of 'the general fees.' One of the questions is, well, walk me through it. What does it mean for my money, for my account? Tell me what it costs to me."
The SEC conducted a series of investor roundtables over the summer to generate feedback on the disclosure form and other aspects of the advice reform proposal, whose comment deadline is Tuesday. The roundtables were
conducted in private, but the SEC is
posting transcripts as they become available. SEC chairman Jay Clayton and other officials attended the events.
An investor at a
June 13 roundtable in Atlanta suggested the disclosure form be augmented with an online cost calculator.
"Why not an electronic scorecard where you can compare various financial professionals so you could weigh whatever measures you want," said the participant.
Another investor said the Form CRS model included in the rule proposal was too text-heavy.
"The words run together, and even if it's more than these pages that you are trying to keep it to, if it makes it easier for things to stand out" the document would be useful, said the participant.
A participant at a July 25 roundtable in Denver said the Form CRS model is dull.
"My eyes glaze over when I look at this form because it's boring and old school and looks like something the government produced," said Jaimie Davis in an interview.
Ms. Davis attended the Denver event in order to tell her story of losing $2.3 million dollars when a broker took all the proceeds from the sale of her small businesses and invested them in unregistered securities that collapsed. She lost the case against the broker in Finra arbitration.
She'd like to see her distrust of brokers highlighted in Form CRS through a better explanation of the transactional nature of the broker relationship versus the longer-term duty of care required of investment advisers.
"The form needs to be more blunt," Ms. Davis said. "Do you want a one-night stand or do you want a spouse? To me, that's what it comes down to."
