Printer Friendly

The financial services institute.

THE FINANCIAL SERVICES INSTITUTE (FSI), the association of independent broker-dealers, e-mailed a 10-page letter to the SEC in early November, warning of the "important unintended consequences" for IBDs, their reps and those reps' clients should the SEC's proposed changes to Rule 12b-1 be adopted by the Commission.

Signed by the president and CEO of FSI, Dale Brown, the letter warns that adoption of Rule 12b-2 would have the effect of "limiting investor access to service and support" and instead would create a "duplicative, ineffective, post-transaction disclosure regime."

FSI polled its individual advisor members to get their feedback on what 12b-2 would mean for them and their clients. The polled advisors, the letter said, would support "adoption of proposed descriptive names for mutual fund distribution fees and enhanced prospectus disclosure improvements" as called for in the proposal.

However, the advisors said they would oppose the "detailed confirmation disclosures" in the proposal, worried that the proposed new rule's cap on ongoing sales charges would "reduce investors' access to competent service and support," and that moving "low-net-worth" clients from C shares to investment advisory accounts would result in "higher costs for the investor."

FSI says the conclusions to be drawn from their survey of advisor members is that those advisors would support "common sense improvements" to the disclosure of mutual fund distribution fees.

In its letter, the FSI argues that 12b-1 fees are at least partially responsible for the growth of the mutual fund industry and investors' participation in mutual funds, and asks the SEC to "substantiate its recommendations" before changing the current mutual fund distribution fee "structure," particularly in light of the Commission's "ongoing standard of care owed to investors," BDs and their reps.

Dallas-based broker-dealer 1st Global announced in early November that Dr. Arthur B. Laffer, "Father of Supply-Side Economics" and inventor of the Laffer Curve, will be an economic advisor to the firm's investment committee and executive management team.

According to the company, Laffer will provide analysis and advice regarding the current economic environment and its implications for not only the general business climate but also its impact on the decisions made by the 1st Global IMS investment committee.

"Dr. Laffer thinks like a tax professional," said 1st Global CEO Tony Batman, when asked about the genesis of the relationship. "He understands the incentives and motivations for the decisions investors make. Since we are a firm focused on helping our advisor partners with CPA, tax and estate planning issues, he is a natural fit."

Batman doesn't believe Laffer's political pedigree, including as an economic advisor to both President Ronald Reagan and Prime Minister Margaret Thatcher, will be an issue with 1st Global's 500 advisor firms or their clients.

"[Leffer] is an intellectual giant, known first and foremost as an economist," he said. "People might debate his political pedigree, but his economic principals are solidly planted and impossible to refute."

Laffer is the founder and chairman of Laffer Associates, an economic research firm that provides investment-research services to institutional asset managers, pension funds, financial institutions, and corporations. He was a member of President Reagan's Economic Policy Advisory Board for both of his two terms (1981-1989). He was a member of the Executive Committee of the Reagan/Bush Finance Committee in 1984 and was a founding member of the Reagan Executive Advisory Committee for the presidential race of 1980. He also advised Prime Minister Margaret Thatcher on fiscal policy in the United Kingdom during the 1980s.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2010 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:NEW & PRODUCTS
Publication:Investment Advisor
Date:Dec 1, 2010
Previous Article:Form ADV changes have advisors worried: newly created guides can allay confusion.
Next Article:Strengthen portfolios and client confidence through open architecture: the past two years have been a lesson in wealth preservation.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters