More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
This is an extended version of the profile that appeared in the May issue of Investment Advisor, part of AdvisorOne's Special Report profiling this year's members of the IA 25, the most influential people in and around the advisor universe. See the complete list and Special Report schedule for extended profiles of all the 2011 members of the IA 25.
These days, being called a “Washington insider” could be considered pejorative, but smart advisors and their partners are well aware that it’s also true now that advisors and their partners must, as PIMCO’s Mohamed El-Erian predicted at a Morningstar conference following the financial crisis, “Get used to the government being your partner.”
Trying to increase the chances that the "government" is an informed and helpful partner to investment advisors is David Tittsworth’s stock in trade. The executive director of the Investment Adviser Association (IAA) has raised significantly his profile, and that of the RIAs that he represents and of the IAA itself over the past few years through his testimony on Capitol Hill, through partnering with other advisor advocacy groups and through his quiet and effective advocacy inside the Beltway, all informed by his insider’s knowledge of how government works, or doesn’t.
“Our members want a government that works better than it has. There are divisions among investment advisors just like any other constituency,” Tittsworth said in an early April interview, but “most investment advisors support appropriate regulation.” Moreover, Tittsworth argues that “there’s a role for the federal government and specifically the SEC for carrying out the regulation. That’s one of the questions that remains as this plays out,” referring to implementation of Dodd-Frank and the federal budget debate. “What will the SEC get in terms of funding? Will you get an SRO like FINRA which is lobbying heavily for the job, or will investment advisors pay some sort of user fee to support regulation of the profession?” Tittsworth points out that “these are open questions” to which it is “impossible to predict the answers.”
Bringing up another member of the IA 25, New Jersey Republican Scott Garrett, Tittsworth said the Congressman “is going to be a player in all of this.” He and others, Tittsworth says, are raising the question of whether SEC funding should be significantly increased as Dodd-Frank authorized and as was the case following passage of Sarbanes-Oxley. “Or do we say to the regulators, ‘You’ve got to do more with less.’? There’s probably some truth on all sides of the argument.”
Returning to his constituents, Tittsworth notes that the IAA’s members are “very concerned about the consequences of Dodd-Frank,” with which “we will all be dealing for years to come. What we’ve seen so far is only the tip of the iceberg.”
Acknowledging that the government does not work like business—“It’s not a linear process” that is neither “particularly neat or orderly”—Tittsworth is nevertheless comforted that “we have an opportunity to participate.” He suggests, too, that advisors need to be more engaged in the Washington process. “Other industries are better financed and organized than this profession,” recalling the insurance and broker-dealer industry’s clout in changing provisions of Dodd-Frank before it became law. Perhaps a happy if unintended consequence of Dodd-Frank, he says, “is that the RIA profession does a better job on advocacy at the federal level.”
Read more about the rest of the IA 25.
Don't see someone on this year's IA 25 that you think belongs there? Submit their name and your justification for why they should be considered among the most influential people in and around the advisor universe in the Comments field below. We promise to consider reader nominations, but please, no ad hominem attacks on those who were named in this or past years.--Ed.