TD Waterhouse Takes Stand Against 'The Merrill Lynch Rule'
NEW YORK, NY, November 22, 2004 -- TD Waterhouse USA today announced its stand on "The Merrill Lynch Rule" and called for the debate over the regulation of fee-based advisory services to be resolved in favor of investor protection. TD Waterhouse is the first brokerage firm to take a public stand against the adoption of "The Merrill Lynch Rule," a rule proposal put forth by the SEC in 1999 that exempts stockbrokers offering fee-based financial advice from providing the investor protections of the Investment Adviser Act of 1940.
TD Waterhouse also released the results of an investor survey, which found that investors had a high level of concern about unequal investor protections associated with fee-based financial advice. Eighty-one percent of survey respondents were either very concerned or somewhat concerned that both stockbrokers and investment advisors provide fee-based financial advice yet offer unequal levels of investor protection. Based on the survey findings, TD Waterhouse developed three key questions all investors should ask before accepting fee-based financial advice.
"As a leading discount broker serving over two million U.S. investors, we've been monitoring this issue carefully and recognized early on that no other brokerage firm was advocating the best interests of individual investors," said Tim Pinnington, President and Chief Executive Officer of TD Waterhouse USA. "We recommend a common industry standard that provides investors uniform protection around fee-based financial advice. We established this position in a Comment Letter to the SEC and believe it addresses the investor concerns identified in our survey."
The survey, conducted by research firm Penn, Schoen & Berland Associates, revealed that investors are either unaware of, or confused about the unequal protections offered by those who provide fee-based financial advice. Fifty eight percent incorrectly believe that both stockbrokers and investment advisors have a fiduciary responsibility to act in the investor's best interest in all aspects of the financial relationship, and 63% incorrectly believe that both stockbrokers and investment advisors are required to disclose all conflicts of interest prior to providing financial advice. Nonetheless, nearly 85% of investors expect all financial professionals offering fee-based financial advice to provide these protections.
Consequently, investors expressed a high level of concern regarding the unequal protections provided by existing regulation. Eighty three percent were either very concerned or somewhat concerned that all financial professionals offering fee-based financial advice are not subject to the same industry regulation.
Lastly, 86% of investors indicated that their choice of financial professional would be impacted if they understood the different levels of investor protection from stockbrokers and investment advisors offering the same fee-based advisory services.
When asked about a solution to the unequal regulation, 90% of those surveyed expressed support for Congress to enact legislation that creates a clear, uniform standard of investor protection for all stockbrokers and investment advisors who provide investors fee-based financial advice. And 88% believe that this legislation would boost investor confidence.
"To help investors understand the current protections provided by their financial professional, we have developed three key questions that investors can use right now to make informed decisions around fee-based financial advice," said Mr. Pinnington.
In addition to the customary questions investors should ask of their financial professional, TD Waterhouse recommends the following when considering fee-based advice:
Three Questions that All Investors Should Ask Before Accepting Fee-based Advice
- Do you provide fee-based financial advice as a Registered Investment Advisor or under the broker exemption known as "The Merrill Lynch Rule"?
- When providing fee-based financial advice, what are your obligations to act in my best interests?
- What are your disclosure requirements when providing fee-based financial advice?
About The Study
TD Waterhouse USA commissioned research firm Penn, Schoen & Berland Associates, Inc. to conduct interviews with 1,000 American investors who own stocks, bonds, or mutual funds outside of a company-sponsored plan. The survey has a margin of error of + or - 3%. Interviews were conducted online from October 18 - 22, 2004.
Click here for a copy of the study results.
About TD Waterhouse
TD Waterhouse Group, Inc. provides investors and financial advisors with a broad range of brokerage, mutual fund, banking and other consumer financial products. Worldwide, TD Waterhouse currently services 3.1 million active customer accounts. TD Waterhouse is a wholly owned subsidiary of The Toronto-Dominion Bank (NYSE, TSE: TD) and part of TD Bank Financial Group. Headquartered in Toronto, Canada, with offices around the world, TD Bank Financial Group offers a full range of financial products and services to approximately 13 million customers worldwide. In the U.S., brokerage services provided through TD Waterhouse Investor Services, Inc., Member NYSE/SIPC.
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