Trade Associations
Scheduled Congressional Testimony Strongly Tilted Toward An RIA SRO
Sunday, September 11, 2011 23:44

The House Financial Services Committee has finally announced the panelists for Wednesday's hearing on advisor regulation. The list is not friendly to those who would rather remain under SEC oversight.

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Out of eight scheduled witnesses, only one -- David Tittsworth, head of the Investment Adviser Association -- is likely to advocate keeping the SEC as registered investment advisors' regulator.


Bill Dwyer of the Financial Services Institute, a trade group for independent broker-dealer firms, is probably going to pitch for RIAs to shift to a self-regulatory organizational (SRO) framework.


After all, the RIA reps he works with tend to be dual-registered and so are already overseen by FINRA anyway. Moving the advisory side of their regulatory duties from the SEC would only simplify their compliance environment -- while it would complicate life for pure RIA firms.


Terry Headley of the National Association of Insurance and Financial Advisors will probably also lobby to move RIA oversight to FINRA and argue against the universal fiduciary standard while he's at it.


Ken Erhinger of the Association for Advanced Life Underwriting is a bit of a wild card, but his insurance background makes him a natural NAIFA ally.


John Taft of the wirehouse-driven Securities Industry and Financial Markets Association has espoused similar goals in the past.


Rick Ketchum of FINRA's view is clear. He'd love to absorb RIAs into his current responsibilities.


And consumer advocate Barbara Roper has already conceded that an SRO for RIAs is almost a done deal. She'll probably argue passionately about the fiduciary standard, but sees the SRO as a lost cause.


Is it just a matter of not enough RIA-only groups with the clout to get on this panel?


Advisors who feel strongly about this issue still have a little time to write their representatives with an explanation of why SEC oversight is good for investors, but not much.


Fiduciaries In Focus With New Think Tank, Academic Advisory SRO
Wednesday, August 24, 2011 08:05

Tags: Evensky | fiduciaries

Redefining the nature of fiduciary duty is on the agenda for both a new advocacy group and the academic "advisor SRO" that formed earlier this year.

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The Institute for the Fiduciary Standard will serve as an advocacy group for those who resist the dilution of fiduciary responsibility and a think tank to feed the press.


Knut Rostad, who formerly ran the Committee for a Fiduciary Standard, is on tap to run the new group, which is seeded by seven high-ranked members of the CFS and Roger Ibbotson as well.


The legendary Harold Evensky will take over the CFS.


The new group has already started rebuilding the wall between fiduciary advisors and those tied to more basic suitability rules. As they note, these are "two very different rules."


Meanwhile, the Self-Regulatory Organization for Independent Investment Advisors, now somewhat more comfortably known as SROIIA, has leapt into the fray by coming up with a new fiduciary exam.


The group, created by University of Mississippi law students to give RIAs a choice of SROs if they are pushed under some form of self-regulatory framework, has been working closely with the CFS to firm up the fiduciary code.


The new test was created in partnership with fiduciary support firm fi360.

Pro-IBD Financial Services Institute Expands Its Lobbying "War Chest"
Monday, August 15, 2011 23:10

Tags: independent broker-dealers

Less than a week after signing up every single advisor in the LPL network, the Financial Services Institute keeps winning members and cash contributions to its pro-IBD cause.

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The latest independent broker-dealer to register its members en masse is Investors Capital, which boasts over 500 advisors on its books.


Investors Capital went a few steps beyond LPL in its support for the lobbying group, which has included bringing RIAs under FINRA supervision in its policy agenda. 


While LPL only paid the first-year dues for its 12,000 advisors, Investors Capital is effectively paying its advisors' membership fees for life.


And it is matching any additional contributions they make to the group. At the firm's recent national conference, the matching program helped FSI raise at least $25,000.


Tim Murphy, the firm's longtime CEO, says "what's good for FSI is good for the industry."


Dale Brown, CEO at FSI, says his group has a five-year plan to get their agenda in front of lawmakers. Right now, they're going after the Labor Department's tighter fiduciary rules for retirement plan advisors as well as the SEC's efforts to meet Dodd-Frank requirements to apply the fiduciary code to all advisors.


They're not overconfident yet. As Brown says, "We need all the firepower we can get."



Financial Services Institute Clarifies Its Use Of "Independent Financial Advisor," Stance On RIA SRO
Wednesday, August 10, 2011 18:02

Tags: financial advisor | independent broker-dealers

A4A readers were a bit perplexed to hear about how the Financial Services Institute -- the umbrella group for independent broker-dealers -- is staking its claim in the industry. So I asked them to clarify.

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FSI spokesman Chris Paulitz knew exactly where I was coming from when I said RIAs were pondering the group's mandate.


Regarding why the FSI bills itself as an organization for "independent financial advisors," his answer was straightforward: most of the members are hybrid RIA/reps.


"We use the term 'independent financial advisor' because the majority of our financial advisor members are dual registered as registered representatives and investment adviser representatives," he says.


I know a few of you are skeptical about exactly how these dual registered types operate in practice, but there it is. I've seen plenty of financial planners who offer both fee- and commission-based service "in order to reach a broader range of clients."


Now as for why the FSI has lobbied to move RIA supervision to a self-regulatory organization (SRO) like FINRA, Paulitz says it's to protect investors and ultimately, for the industry's own good:


"We support a harmonized fiduciary standard of care and SRO for advisors because we believe these changes will result in uniform investor protection whether investors choose to work with registered representatives or investment advisors.  Currently, the average RIA is only examined once every 11 years. If all advisors are regulated by the same SRO, investors will be able to feel more confident in the industry, and that will be a win-win for advisors and investors."


Granted, most of his members are already in FINRA anyway, so combining their advisory regulation with their broker-dealer regulation would simplify things enormously for them.


But the logic here is client-centric. Can foes of the SRO make a similar case for remaining under the SEC, from the client's point of view?


I'm sure there's one out there. I just haven't heard it lately.




LPL Throws Its Advisors' Weight Behind The Financial Services Institute
Tuesday, August 09, 2011 07:01

The independent broker-dealer group that has come out in favor of registered investment advisors moving to FINRA supervision just got a very powerful friend in the industry.

This Website Is For Financial Professionals Only


LPL has signed up all of its 12,600 broker affiliates to a free year of membership in the Financial Services Institute.


FSI is presumably already aligned with LPL's goals -- it's run by Bill Dwyer, who just happens to be LPL's head of marketing -- so this largely just beefs up the group's membership.


LPL reps get access to FSI communications and analysis of breaking regulatory topics. 


The move represents a fairly significant expenditure on LPL's part. Next year, its reps who choose to remain members will have to pay a discounted $99 a year to stay in the group, so we are looking at over $1.2 million in membership fees here.


Dwyer says the group is the only one focused on "the industry-wide advocacy needs of independent financial advisors" and that the stronger relationship is designed to "protect" advisors' ability to stay in business, regardless of compensation model.


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