NAPFA Challenges the Securities and Exchange Commission

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The National Association of Personal Financial Advisors (NAPFA) is challenging the Securities and Exchange Commissions (SEC). In a recent email to members they wrote:

In April, the SEC released the proposed rules on conduct standards for broker-dealers and investment advisors. These rules contain erroneous information about the differences between brokers and advisors. NAPFA is now partnering with a consortium of fiduciary-centric organizations convened by the Institute for the Fiduciary Standard on a campaign to educate the SEC on the true differences between advisors and brokers. We would like to encourage NAPFA members to participate in this campaign as it is an important step in ensuring that we get the SEC Rule that we – and consumers – deserve.

I couldn’t be prouder to be a NAPFA-Registered Financial Advisor. NAPFA’s criticisms of the SEC and of their warped version of reality are well justified. NAPFA is joined by several other organizations who are tired of the SEC’s unequal standards and failure to uphold the law.

Over the past year, we have written about how the new SEC Advice rule abandons the fiduciary standard for brokers and the SEC has stood in contempt of court for failing to enforce the law for the past decade. The SEC’s latest ruling allows non-fiduciaries the ability to claim to act in the “best interests” of clients without abiding by the fiduciary standards, and lends more evidence that the SEC suffers hopelessly from regulatory capture.

Among the differences between advisors and brokers that are missing from the SEC’s regulation are the following facts:

Advising practices, like ours, are held to a fiduciary standard. We have a legal obligation to strive to do what is in our client’s best interest. Brokers are not and do not.

We are a planner and advisor to our clients. The major focus of our services is comprehensive financial planning which is both personalized and integrated. It includes everything from tax planning to life planning. We spend the majority of our time on financial planning as opposed to portfolio design and management. While we believe that our asset allocation design and portfolio management are excellent services, we give simple low cost gone fishing portfolios away for free.

Our advisors are not hired to sell products nor are they trained in sales. They are hired to advise clients and are trained in financial planning and personal financial advice. We value the Certified Financial Planner™ (CFP®) designations.

As an RIA, we render fiduciary advice in intimate relationships of two. Brokers, on the other hand, can only offer incidental advice in sales relationships of three.

Each of our clients has a portfolio which is unique to their situation managed from a common firm philosophy. Our investment product recommendations are wide and deep. They come from multiple different companies and are not laden with commissions or 12b-1 fees. We are free to recommend whatever investments we believe are in the client’s best interests.

We minimize conflicts of interest by only receiving compensation from client fees. We do not accept commissions or other third-party payments in connection with my recommendations. And we do not have any financial hooks such as lock up periods or surrender charges keeping clients captive.

The fees and the underlying investment costs that clients pay are transparent and clear. We send clients quarterly reports of our fees. There is no confusion: Our clients know what they’ve paid and what we’ve earned.

We do not sell insurance products such as whole life, annuities, or proprietary products, nor do we engage in principal trading or self dealing.

Our ADV Part 2 highlights how many material conflicts of interest we avoid by our business practices.

We believe that these distinctions set us apart from other firms.

Before working with any advisor, ask them these ten questions.

And give us a call today if you want to experience the different way our firm would work with you.

Photo by Felix Koutchinski on Unsplash

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)