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Financial Regulation

Dear Congressman Castle,

I am writing to you in support of some of the key provisions of the legislative proposals encapsulated in Financial Regulatory Reform: A New Foundation

I have been in practice as a financial advisor for twenty-six years, and therefore have more than the usual amount of understanding of these proposals and how they would affect the financial services world, and financial consumers generally. I have also been involved in financial education through a number of volunteer efforts, including the Delaware Society of CPAs Financial Literacy Committee. Until recently, I was concerned that significant issues related to the oversight of financial "advisors" were not being addressed. Now, as a result of the above mentioned legislative proposals, I think there may be a real chance to protect our financial markets and financial consumers.

I've watched brokerage firms, insurance companies, and investment banks wreak financial havoc on financial consumers, retirees, and many of your constituents. Now, those same companies, and their trade organizations, are spending millions of our taxpayer dollars, out of the TARP fund, to try to lobby against more effective regulation. For years they have successfully lobbied against product transparency and being held to a fiduciary standard of care whenever they give investment advice. I ask you to resist their self-serving pleas and stand up for consumers.

The current financial service industry makes it next to impossible for the citizens of this country to understand what they are buying, what conflict of interest may be tilting the recommendations they receive from "advisors", and what they are paying to have their financial plans put in place. This has got to stop.

If financial consumers (all citizens) are to have a fighting chance to educate their children and achieve retirement security, we must provide for clear transparency of all financial products, and make it easy for consumers to locate advisors with a fiduciary duty to them, as opposed to "advisors" bound by a legal duty to serve the "advisor's" bank, brokerage or insurance employer.

The brokerage industry has long held themselves out as providers of financial advice without being bound by a fiduciary duty to serve clients first. As a result consumers do not know who to trust and think all financial consultants, advisors, wealth managers (or whatever creative name they will think of next) are bound by the same rules.

Please fight against any attempt to water down the provision to hold brokers to a fiduciary standard. (see page 71 of the report) If exceptions are made, I guarantee you that the pubic will remain confused about the level of care and duty they can expect from their financial professional.

I would also caution against any provision which transfers regulatory authority of investment advisors to FINRA's jurisdiction--something the Financial Regulatory Reform proposals do NOT talk about, but which might be inferred from the call to harmonize regulation. FINRA executives have outspokenly denounced the fiduciary standard for investment advice, and have aggressively lobbied to regulate advisors under a compliance standard. I hope you can recognize this as a transparent attempt by the brokerage industry--whose executives sit on the FINRA board--to coopt regulation of all financial services, and attempt to impose regulations that would put fiduciary advisors out of business.

I also support the proposed Consumer Financial Protection Agency. I support this provision because it attacks the problem of unsafe financial products directly, rather than how FINRA has always tried to control them, by determining whether the product was "suitable" to the financial consumer's circumstances. That suitability standard has resulted in a lot of junk being placed in people's portfolios that would have never ended up there if a fiduciary standard was in place.

This is a critical time for the country. It is no more critical for retirees and workers than for our children and grandchildren. Give them a fighting chance to put their financial house in order so they will be less reliant on government assistance in the years ahead. Level the playing field between the financial service industry and the public. Make their products transparent, identify salesman as such, and require a fiduciary standard for all who hold themselves out as providers of financial advice. Your courage can make a difference.


Vincent A. Schiavi, CFP®, CPA/PFS