From the April 2007 issue of Boomer Market Advisor • Subscribe!

The independent model is the right way to do it

Rulemaking by enforcement, product suitability and -- of course -- the NASD/NYSE merger were hot topics at this year's Financial Services Institute OneVoice Broker/Dealer Conference in Orlando, Fla. FSI chairman John Simmers, who also happens to be chief executive of ING Advisors Network, spoke candidly with Boomer Market Advisor about these and other issues.

Boomer Market Advisor: What goals have you mapped out for FSI during your tenure?
John Simmers: We'll continue to constructively engage regulators on the differences between the independent broker/dealer and the employee-based broker model. This is an opportunity to educate the SEC as to what we're about. The independent broker/dealer is much less problematic than the employee-based model. To back up for a moment -- in the 1970s, there were a lot of disparate parts to the industry, meaning consultants, attorneys, CPAs and the like. The rise of the independent model took all these disparate people and combined them, and so, from a regulatory standpoint, the independent model is the right way to do it. Also, many regulators believe that cost alone should be the overriding factor in determining suitability. It's an institutional bias on their part, and one that we'll continue to address. We're also engaged in the issue of rulemaking by enforcement, which uses enforcement action to develop guidance, rather than the traditional process that invites industry feedback and provides advance notice of upcoming rule changes.

BMA: It's official; NASD members voted to merge with the NYSE. Do you have any concerns about the logistics of the merger itself?
JS: We were able to carve out certain provisions for the independent broker/dealer model in the new organization, so we preserved a seat at the table as an industry. The people at the top level of the merger get us, and we're not too worried about them. It's the second tier of management at the two organizations, [we hope] don't get too overzealous. If they do, we'll be sure to report back to Mary Schapiro and Rick Ketchum.

BMA: Critics of the merger argue the industry will have less of a voice now that Mary Schapiro will appoint public board positions. How do you respond?
JS: It's still a self-regulatory body. We preserved the committee structure. New rules start in committee and end up at the board, not the other way around. It's still a bottom-up type of process. To Mary's credit, she really reached out to industry associates. She listened to what they had to say, and it was a wake-up call that the industry is overregulated. The road shows helped. They gave out good information.

BMA: Critics also point to the amount of cash the organization controls, and they say it will now not be distributed fairly to members.
JS: That's ridiculous. The members voted about self-regulation and how it would best be preserved. It wasn't about the distribution of the organization's assets. And anyway, it's a nonprofit organization.

BMA: What else do you hope to accomplish as the chairman of FSI?
JS: We'll continue to work with local congressmen at the grass roots level to educate them as to what we're about as an industry. We'll also continue to tell our story and produce substantive white papers. We're strong advocates for the independent broker/dealer model, and we'll focus on increasing the individual rep portion of our membership.

BMA: Switching gears - ING is growing at a fast pace and attracting new recruits. To what do you attribute this success?
JS: Business is good. We've had double-digit growth in four of the past five years.

I attribute it to our strong ING brand, our cutting-edge technology with SmartWorks and the fact that we offer top-notch products. Our organic recruiting has never been stronger and we're getting recruits from everywhere, really. We were one of the first firms to have an advanced markets department. On the educational front, we have Advisory University for the comprehensive training of our reps. So we're comfortably positioned in the top tier.

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