Financial Services Institute Clarifies Its Use Of "Independent Financial Advisor," Stance On RIA SRO


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.




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