Seems to be a gamble to me. If a complaint ever arose, how would you prove you didn't give them securities advice? I've thought of drafting a CYA letter to have clients sign, but still don't know if that'd hold any weight. The problem with getting securities licensed having no intentions of writing securities business is most BD's won't just let you park your license there without a minimum GDC. Plus, then you're paying higher E&O to cover the sales and service of securities, even though you're not selling them.
6 and 63 License
- Thread starter Sales71
- Start date
- 11,280
If you're looking at the statement and looking up fund symbols to determine their performance, holdings, statistics, etc., you are giving securities advice.
If you are judging or evaluating the portfolio and giving advice based on what you see on the statement... you are giving securities advice.
If you are simply asking questions, letting the client tell you what they think... and present an alternative to their investment portfolio... that is NOT giving securities advice. That is presenting an alternative, and asking if they think it would fit their situation better.
Most B/Ds require a "Switch" letter that make you document how you are materially improving the client's situation from where they were, to where they are going. This is also where you would put any CDSC charges incurred (or not) on liquidating the portfolio, and document the new surrender schedule on the new product. Then there is a space where the client completes an explanation as to why they are moving the portfolio.
What needs to be clear, is that the liquidation of the portfolio cannot be solicited. It must be Unsolicited for it to hold up.
Here is a sample switch letter from a B/D in California:
http://questcapital.com/Web/RequiredFormsfiles/Quest-Investment%20Exchange%20and%20Switch%20Letter%201-2008.pdf
If one is regularly doing this kind of business... I would have a similar letter drawn up for the client to sign for your records. Just show 'before', 'after', and the reasons why the client wanted to make the switch.
If you are judging or evaluating the portfolio and giving advice based on what you see on the statement... you are giving securities advice.
If you are simply asking questions, letting the client tell you what they think... and present an alternative to their investment portfolio... that is NOT giving securities advice. That is presenting an alternative, and asking if they think it would fit their situation better.
Most B/Ds require a "Switch" letter that make you document how you are materially improving the client's situation from where they were, to where they are going. This is also where you would put any CDSC charges incurred (or not) on liquidating the portfolio, and document the new surrender schedule on the new product. Then there is a space where the client completes an explanation as to why they are moving the portfolio.
What needs to be clear, is that the liquidation of the portfolio cannot be solicited. It must be Unsolicited for it to hold up.
Here is a sample switch letter from a B/D in California:
http://questcapital.com/Web/RequiredFormsfiles/Quest-Investment%20Exchange%20and%20Switch%20Letter%201-2008.pdf
If one is regularly doing this kind of business... I would have a similar letter drawn up for the client to sign for your records. Just show 'before', 'after', and the reasons why the client wanted to make the switch.
Getting out of bed every morning is a gamble. Either you understand the laws in your state (call either your DOI and probably the securities division of your Secretary of State office) and abide by them or cave in and become a RIA or IAR or get your 6 or 7.
Just because you get your 65 or 6 or 7, you're not out of the woods if you advise the liquidation of securities for fixed products. What do you think would happen if someone complains and the regulators put you under a microscope? They'll see you have the necessary registrations to give investment advice, but what do you think will happen when they see that the only securities advice you ever give is to SELL in order to fund fixed products?
My point is that being registered isn't a bullet-proof vest.
This offers some guidance on this subject.
Tennessee clarifies insurance-only advisor activities | LifeHealthPro
Tennessee clarifies insurance-only advisor activities | LifeHealthPro
Thanks for the post xrac. My annuity FMO is the one who referred me to get my securities licenses. I'm in the studying process now, but I have no intentions of selling securities, just wanted it for a CYA to move variable business when the client wanted to. I'm going call the IA insurance department and see if I can get clarification as my upline was under the assumption I needed it. I rather not have it due to increased scrutiny, fees and insurance costs.
Those seem to be common-sense. I called both the DOI and securities division of the office of the Secretary of State here in NC. Neither department had anything concrete. The securities division attorney sent me a link to a couple of articles for general guidance that I had seen before.
It dawned on me that the industry insiders that are crying wolf the loudest also just coincidentally have their hands in the RIA pie. For example, Roccy Defrancesco promotes or is connected to Horter Investments, a sort of RIA / IAR in a box - and he has written a ton of scary articles about source of funds.
- 11,280
I can see that. Most of the "source of funds" debate has been from industry magazine articles - particularly during the whole 151a debacle. Haven't seen much of anything directly from regulators - FINRA or otherwise. There was an article where Jack Marrion said what Arkansas says... but that's not direct from them.
Trust, but verify.
Trust, but verify.
- 15,041
Just a wild thought...
A consumer could probably sue for restriction of interstate commerce. An Arkansas resident would be prohibited from liquidating his securities to buy an insurance product from his favorite agent who just happens to be out of state (your interstate commerce part).
I'm sure it will never happen, but an interesting thought exercise.
Similar threads
