Investor protection act of 2009

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Nov 9, 2009 4:00 pm

I was wondering what your thoughts were on this bill. I reading an article from fox business talking about this should give rise to the end of C shares and loaded funds in general.

Nov 9, 2009 4:14 pm

I think potentially one of the biggest concerns is that a prospectus may be required to be delivered PRIOR to any transaction taking place.

 
How do you cold call or place a trade via phone in this instance?
 
As for C share elimination or Loaded Funds, I don't see how that is likely. C shares make alot of sense for an investor who isn't going to be locked into 5+ years in the same fund. Also, this implies that A shares are the better route now, but most everyone on here scoffs at A share recommendations by the Jones guys. Seems counterintuitive to me.
 
End of loaded funds? OK, then every fund will have an expense ratio of 2+%, how does that benefit the client exactly?
 
 
Nov 9, 2009 4:36 pm

The REAL probalem is that all investor's needs are different.  Yes, some people see real value in an advisory relationship.  However, I have some clients that are perfectly happy paying commissions.  I also have some clients that do not want to be locked into one fund family, and understand the internal load on the C share.  I think this is actually a disservice to the customer in general, as most "bad" advisors will still find a way to game the system, and it further reduces "options" for the public.

Nov 9, 2009 4:57 pm

It's one more instance of government intervention and control grabbing where they really don't understand what they're doing. 

 
LSU - just to argue the counterpoint - why then, wouldn't a fee based program be better?  No share classes means that it really doesn't matter how long someone is going to be investing the money, the cost is the same.  So instead of having to discuss A, B, C shares vs fee based with a client, you can just say my costs are 1%. 
 
Anyone have any fears that if they do this, fees will be the only competitive advantage one broker has over another?  If the whole industry went fee only, wouldn't a bidding war and corresponding asset grab ensue?  At what point does the government, under the guise of protecting the investor, start telling us what our fees are going to be? 
Nov 9, 2009 5:05 pm

on a related note, Compliance is the largest growing job area in Financial Services...

 
muwhahahaha
Nov 9, 2009 5:46 pm
LSUAlum:

I think potentially one of the biggest concerns is that a prospectus may be required to be delivered PRIOR to any transaction taking place.

 
How do you cold call or place a trade via phone in this instance?
 
As for C share elimination or Loaded Funds, I don't see how that is likely. C shares make alot of sense for an investor who isn't going to be locked into 5+ years in the same fund. Also, this implies that A shares are the better route now, but most everyone on here scoffs at A share recommendations by the Jones guys. Seems counterintuitive to me.
 
End of loaded funds? OK, then every fund will have an expense ratio of 2+%, how does that benefit the client exactly?
 
 

Isn't a prospectus necessary now? 
How many seconds does it take to e-mail a prospectus?
Nov 9, 2009 6:38 pm

Heard former SEC Chairman Levit last week say he envisions fee's on managed accounts at the brokerage firms will be not higher (capped) than 3/8 to 1/2% by end of 2011.  That will be nice.

Nov 9, 2009 8:06 pm
anonymous:
LSUAlum:

I think potentially one of the biggest concerns is that a prospectus may be required to be delivered PRIOR to any transaction taking place.

 
How do you cold call or place a trade via phone in this instance?
 
As for C share elimination or Loaded Funds, I don't see how that is likely. C shares make alot of sense for an investor who isn't going to be locked into 5+ years in the same fund. Also, this implies that A shares are the better route now, but most everyone on here scoffs at A share recommendations by the Jones guys. Seems counterintuitive to me.
 
End of loaded funds? OK, then every fund will have an expense ratio of 2+%, how does that benefit the client exactly?
 
 

Isn't a prospectus necessary now? 
How many seconds does it take to e-mail a prospectus?

Currently a prospectus is not needed before an order can be taken and placed. It is required in the new system before you can place the order. Here's the deal, how many times have you talked to someone only for them to stall you and say 'let me think it over'. Now you are forcing people to think it over. Sounds good initially, but then again how many people 'think it over' by talking to their know it all brother in law who says you're trying to screw him over and he should only buy no load funds?
 
 
Nov 9, 2009 8:11 pm
Spaceman Spiff:

It's one more instance of government intervention and control grabbing where they really don't understand what they're doing. 

 
LSU - just to argue the counterpoint - why then, wouldn't a fee based program be better?  No share classes means that it really doesn't matter how long someone is going to be investing the money, the cost is the same.  So instead of having to discuss A, B, C shares vs fee based with a client, you can just say my costs are 1%. 
 
Anyone have any fears that if they do this, fees will be the only competitive advantage one broker has over another?  If the whole industry went fee only, wouldn't a bidding war and corresponding asset grab ensue?  At what point does the government, under the guise of protecting the investor, start telling us what our fees are going to be? 

In a fee based program you still have an expense ratio for F-1 shares. The fee based system does not have anything to do with the Fund Family. So, with only fee based systems, mutual fund companies won't have C shares or A shares to build their fees. This means they will raise fees for ALL shares accross the board. So, higher fees accross the board AND the 1% Advisory Fee means the client pays more for the same product. This benefits clients how?
 
Also, most advisory accounts have a minimum $$ figure. With an ALL FEE system what do you do with the smaller investor with less than $100k to manage? Do you lower the requirements to include all investors?
 
Bottom line is if Fees jump on an ongoing basis realized returns will also dwindle hurting most clients in the long run.
Nov 10, 2009 9:57 am

But it's good for them, right?  The government is making sure they're protected. 

 
Nov 10, 2009 11:22 am
Spaceman Spiff:

It's one more instance of government intervention and control grabbing where they really don't understand what they're doing. 

 
LSU - just to argue the counterpoint - why then, wouldn't a fee based program be better?  No share classes means that it really doesn't matter how long someone is going to be investing the money, the cost is the same.  So instead of having to discuss A, B, C shares vs fee based with a client, you can just say my costs are 1%. 
 
Anyone have any fears that if they do this, fees will be the only competitive advantage one broker has over another?  If the whole industry went fee only, wouldn't a bidding war and corresponding asset grab ensue?  At what point does the government, under the guise of protecting the investor, start telling us what our fees are going to be? 
 
Spiff - all good points. in regards to your last question "At what point does the government, under the guise of protecting the investor, start telling us what our fees are going to be? - January 20th, 2009, the date when our government decided it no longer stood for capitalism and found it necessary to begin the process of overregulating, overtaxing and overtaking the economy.
 
It is sooooo easy for the gov't to use the "protecting the investor" card when most investors are ignorant (like most voters) as to what those changes do to an industry. This administration hates business, profit, and capitalism and our industry is the lightning rod for drastic change to the financial markets and the rest of our economy.
 
 
Nov 10, 2009 8:52 pm

loaded funds and c shares are doomed. the industry is shifting to an ria/fee-based model and the schwabs and vanguards will be serving the mass market via etfs and index funds.



Nov 10, 2009 9:24 pm
Spaceman Spiff:

But it's good for them, right?  The government is making sure they're protected. 

 

Is it good for them? Is a fee based system cheaper for an investor?
 
A fee based system is cheaper for a trader but not a buy and hold investor.
Nov 10, 2009 9:41 pm
go_huskies:

loaded funds and c shares are doomed. the industry is shifting to an ria/fee-based model and the schwabs and vanguards will be serving the mass market via etfs and index funds.





If load fund and c shares are doomed, is there any reason why small investors would not get completely ignored?
Nov 10, 2009 9:51 pm

The single greatest fact for us is the ACTUAL performance of individuals in no load funds.........



F obama. F their stupid laws.   I am worth it big time

It aint easy to do well over time

Nov 10, 2009 11:57 pm

Should my doctor be told how to practice and be capped on how to perscribe medications by a legislator who doesn't have the expertise or experience in dealing directly with patients? Funny how no one evaluates Lawyer compensation. The legislators and regulators think they are doing sevice for investors, but capping compensation is bad for investors just like health care and other professions. Let's cap lawyers fees at $75.00 an hour so we can ensure their clients are being protected. In fact, let's start capping all professions and protect the consumers because there is no real value in any professional sevice or advice. Let's hear it for mediocre clerks "managing wealth" and dealing with all the emotional up and downs of clients in a yr. like 2008. It's so much fun to deal with the afternmath of investment banks and corp./govt. shenanigans beyond the control of advisors and clients. Let's cut the pay for those who hand held the investors - that will solve everything. In fact let's make the profession so overregulated and miserable that no one will want to be an investment advisor. Let the public become self investors and they'll be able to handle all of the apsects of investing and planning on their own. In fact, without all the advisors educating and assisting clients, let's start suggesting that 401k's are out of fashion and it's time to get the populace to embrace further dependence on government sponsored and controlled subsidies and entitlements. Maybe all advisors should be going to evening law school so we can make it one big litigous party and then we can charge our law clients whatever the [email protected]*& we want!



Hey - no fee - no service; get it? That was America. Nothing we can do about this crap and if left as a free market, the best advisors will thrive as people need good honest advice and service. If they try capping - well then we'll all work 20 hours a week and give lame service. What a joke. Regulate athletes, doctors, musicians, kids, babysitters, congressmen, sales people, pets, grandmas, teachers, engineers,...but especially those greedy brokers. (Shh! but not the self righteous legislators - their actually looking out for our clients).



I kinda feel better now.

Nov 11, 2009 8:38 am

When the administration gets through ruining the economy with this health care and cap and trade debacle, and the enormous debts they are running up, 35% employment will leave many people the time to do it themselves. Of course, the government wants to eliminate people from making their own choices.

 
Do you guys remember Theresa Ghilarducci testifying in front of congress last winter? She wants mandatory government run retirement plans that will grow at a fixed rate. Similar to social security, everyone will be required to participate. And, if you make over $250k, you will contribute extra to support those making less than $250k. The fixed rate of return will be 3%, invested in 10 year treasuries. The government will take the spread as their nut.
 
I have talked to many that say government will run them out of this business.
Nov 11, 2009 12:49 pm

35% unemployment? This administration began the overtaxing, overregulating, overspending blah blah blah? Wow, some of you really get your facts together before you let your fingers type. As of January 19, 2009, we had not, in our lives, had lower taxes, les regulation, and more over spending than ever before and you were cool with that? But the next day EVERYTHING actually began? You make an intelligent movement sound ignorant. 

  
C-Shares are good for the client who can't handle seeing a fee? Right? Isn't that the justification?  Why not charge a fee like an attorney for our time? I highly suggest learning their model because that will become our norm, and eventually the norm of MDs, they are just 20 years behind on everything.



The world is changing, catch-up.
Nov 12, 2009 9:56 pm

Good Times you are right on many counts.  This did not just happen overnight. Anyone who spits out sound bites as your own from FOX or CNN or any talking head and pointing blame to any person or administration is "full of sound and fury signifying nothing".  The blame is widespread from rating agencies, to multiple presidents, administrations, politicians on all sides, lack of funds and people to enforce regulations, greedy bankers and to some extent ourselves for letting this happen.  Our economy since 1986 has been a debt driven economy-consumer, corporate and least of all government debt when all are measured as a percentage of GDP(not a perfect metric by any means, but an obvious one). We are now 3 times historical averages and higher than the Great Dep. Chose your villian, Ronny, Bill, George and George or Barry, it does not matter.  With regards to our business, politicians and media are grandstanding for their own personal gains whether it be ad dollars, votes, campaign dollars, fame or party loyalty.  An overly simplistic interpretation that is usually manipulated and then vomited for gain through the media is nothing to worry about.  The only thing that I have heard from legit sources is there may be more dislcosure which helps no one.  But...just in case, call your congressman and yell like hell.