Limited-purpose banking likely will never happen

I loved the Viewpoint article “It’s time to institute “limited-purpose banking,’” which appeared in the May 25 issue.

What a wonderful, simple long-term solution to our banking -problems. It is the first viable, imaginative, elegant, logical, flexible and cost-effective argument that I have heard in the past two years that would solve the credit crisis, create a robust capital system and get America growing again.

I would immediately start at least two funds to take advantage of it, which means, unfortunately in this political climate, limited-purpose banking will never happen. How sad for all of us.

Nicholas Gerber
President
Victoria Bay Asset Management LLC
Alameda, Calif.

Advisers should stop worrying about fee audits

Regarding the article “FPA, NAPFA and IAA to fight SEC’s pop quiz proposal,” which appeared in the May 25 issue, what is the fuss?

We have always had surprise full audits. Compared to those, fee audits will be brief and far less disruptive.

Our industry’s reputation has been damaged by scalawags, and we need to rebuild the trust we worked so long and hard to build.

There is a critical difference between firms with outside custodians, which, frankly, every firm should have, and those who have in-house custody of their clients’ funds.

But it isn’t the custodians’ job to police our billing. That is the Securities and Exchange Commission’s job.

We should all stop carrying on about it and get back to work taking care of clients.

Helen Hill Updike
Principal
Bridgewater Advisors Inc.
New York

A new definition of success is starting to emerge

Collectively, we just said goodbye to an era where success was defined by accumulation, and somewhere along the way, values had become incidental.

Yet even as recovery programs are under way, most people are still firmly gripped by fear — fear of how they will rebuild their life’s dreams.

And while the challenges are very real and the costs very high, those dreams will be rebuilt. They will also be redefined.

For most, they will be re-sized.

How will we get there, and what will it look like? The fundamental attitudes, motivations and behaviors that got us into this mess in the first place need to be left behind.

Success as a goal hasn’t been the problem. The definition of success has.

It extends to a culture and government that embraced declining regulation in exchange for potential economic gain. It extends to our collective willingness to not scrutinize and understand how money was being made, as long as it was made.

Somewhere along the way, the definition of success became too narrow.

But the economic challenges we face will lead to change, with business and Wall Street at the core of this economic recovery.

Customers, investors, employees and the public will look beyond performance as the sole metric for success.

They will want to understand the durability of business and investment models. They will require transparency, integrity and honesty from corporate leadership.

They will require accountability. And they will vigorously reject those companies and individuals associated with breaches of trust.

We are leaving an era where success is defined purely as performance, and we are entering an era of the value and values economy.

Howard Sherman
President
Doremus
New York

Fund managers are foxes guarding the henhouse

I know the title of your publication is InvestmentNews, but I hardly think that the article “Mutual fund managers to advisers: Do not abandon underperforming funds,” which appeared in the June 1 issue, is news.

What else are the managers going to say?

Perhaps: “The vast majority of us underperform our benchmark index most of the time.”Or maybe: “We’re not really managing risk to any degree, just hoping for market performance, so why not make the jump to exchange traded funds?”

These guys are the foxes guarding the henhouse, and I for one have basically given up on mutual funds as my investment of choice.

Charles C. Scott
President
Pelleton Capital Management Ltd.
Scottsdale, Ariz.

Finra chief lacks knowledge of fixed-annuity regulation

In the article “Finra chief: Proposed oversight commission could cause cracks in system,” which appeared on InvestmentNews.com on June 8, Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc. of New York and Washington, made some false statements about the fixed-annuity industry.

Specifically, he implied in the article that the annuities sector doesn’t keep the reins tight by requiring licensing exams, reviewing sales materials and requiring registered principals to approve variable annuity purchases.

In addition, Mr. Ketchum was quoted as saying, “In many states, you get detailed information on fees [on fixed annuities], but in some states, you may not.”

These statements are untrue.

State insurance divisions thoroughly review specimen annuity contracts, along with their sales materials, prior to approving them for sale in the state. Every insurance agent who sells fixed annuities must pass a licensing exam to do so.

In addition to these regulatory requirements, state insurance divisions regularly review the suitability of annuity sales and potential market conduct abuses, and they have the ability to impose sanctions, including — but not limited to — fines and revocation of insurance licenses.

In addition, all state insurance divisions’ laws require proper disclosure of annuity benefits and charges, despite the fact that variable annuities are the only type of annuity with an explicit fee structure. Surrender penalties and other such policy provisions are clearly disclosed in all fixed-annuity contracts sold.

It appears that Mr. Ketchum is ignorant about fixed-annuity regulation.

Sheryl J. Moore
President and chief executive
Advantage Group Associates Inc.
Des Moines, Iowa

Government has creative ways to throw away money

I enjoyed the Just Thinking column “Memo to the government: Dead people do not spend,” which appeared in the May 25 issue.

The government comes up with creative ways to throw away money.

I am surprised, however, that dead people don’t spend money. They still vote, don’t they, at least in Chicago?

Thomas F. Scanlon
Principal
Borgida & Co. PC
Manchester, Conn.

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