Abolish the Financial Advisors Act?

Comment posted in TKL Blog


I have a radical suggestion and that would be to scrap the FAA. The FAA is one hell of a bible that I can bet that not a single financial adviser rep has read and understood it from cover to cover. What it does is raise entry barriers to new FAs. I'm not exactly well-versed with the FAA but I believe one such instance is that FAs must have a capital of a certain minimum sum. This prevents FAs with an "ethical" culture from thriving as they won't have that kind of capital in the first place. It is a known fact the "unethical" reps "earn" more than "ethical" reps for their principal.

Another problem in the FAA is under training and competency. Anyone and everyone should be allowed to hold a license. This way, where's the "information assymetry" now? These "part time" brokers can act as the "direct channel" that has been dreamed of for such a long time. They have full time jobs and just act as "form fillers" who knows the drill and won't stuff any products down your throat since they don't live on that anyway. The FAA restricts such "neutral" brokers as the FA has to spend resources to train them to satisfy CPD hours. Without the FAA breathing down FAs to train their brokers, FAs will be more than happy to have "inactive" brokers who do nothing but help friends and relatives fill forms. They know what's going on behind the scene, the commission, the exclusions etc and won't lose too much dough sharing with his "prospect" for the lack of a better word. Honestly, the training for CPD hours is nonsense. How does holding a party at Expo or Suntec count as 5 hours of skills or knowledge?

The professional consultants who do real financial planning can still carry on with their usual rounds, but as many have pointed out, "the probability of finding an ethical and upright financial sales staff is 0.01%."

People always draw analogies between financial "consultants" and doctors. There is a stark difference here. Financial planning is voluntary, and can be managed by yourself provided you read TKL's good book and do research. In fact, you would make the most objective decisions this way as there is 0 conflict of interest. Medicine however requires years of study and training and medical services demand a high price due to this exclusivity to only the brightest and most determined of the population. If fiancial services were to become such (given even higher entry barriers), people will avoid them altogether due to the high charges and simply read TKL's book instead.


wjsim