As the Financial Services Institute prepares to celebrate its 10th anniversary, appropriately enough considering its advocacy efforts, by holding its FSI OneVoice annual conference in Washington, D.C., in January, Investment Advisor Editor Jamie Green caught up with FSI’s president and CEO, Dale Brown, to take a look back at its history, to assess FSI’s current state and to look ahead at where it will focus its efforts in the New Year.
Jamie Green: It’s been a busy year for FSI. You’ve added many new individual financial advisor members—750 over the past month from three different BDs—your inaugural FA Summit meeting was a success and you’ve launched a new website with a stronger focus on social media.
Dale Brown: The most important thing to remember is why we accomplished those tasks you referenced. Our members are looking to us to be their advocate—for close to 10 years now—to create a healthier regulatory environment.
From day one, our army of members has been active on the grassroots level, carrying that important message. Our membership growth is such an important part of our advocacy efforts. And our FA Summit deepened our engagement with advisors, partly by giving them tools to get them more committed.
JG: At the recent Schwab IMPACT conference, former Senator Olympia Snowe spoke about the importance of Americans directly contacting their elected representatives to let them know what they care about. She said that during the government shutdown, polls showed that many Americans were unhappy with Congress, but she lamented the fact that too few Americans were actually contacting their congressmen to tell them that because that’s who members of Congress listen to.
DB: That’s the key to our long-term success: making sure that every member of Congress is hearing from independent financial advisors back in their districts, and to do so not on a one-off basis, but continually over time. When [members of Congress] go back to their districts, they’ll bump into these advisors in coffee shops, in churches—that’s how we’ll get significant influence on these issues.
JG: Speaking of influence, FSI has been very vocal on the Department of Labor’s proposed redefinition of fiduciary in retirement planning, and a recent survey of FSI members showed that advisors themselves were not in favor of such a redefinition. We’ve heard that Phyllis Borzi of DOL will present this redefinition by year’s end. Is that what you hear?
DB: The best information we have is that the DOL is on track to send the proposal to the Office of Management and Budget [OMB] by the end of this year. That [timing] could obviously change, but it will go to OMB first, which will have a minimum of 90 days to review [the reproposal] before it goes to the next step, which will essentially be a repeat of the public comment process that happened in 2010. We’ll get to see the reproposal in the second quarter of 2014.
JG: Any idea if the reproposal will answer FSI’s issues with the original proposal?
DB: We’ve had lots of good ongoing dialogue with the Department of Labor on the issues. That’s been a constructive process, but they’re keeping things close to the vest. Once it’s out, we’re prepared to act: First to read and understand it and analyze it, then we’ll be ready to take action.
JG: Going back to FSI itself, you recently announced some additions to your board of directors and leadership, including big names like Valerie Brown of Cetera, Scott Curtis of Raymond James and Amy Webber of Cambridge Investment Research. How do you get these highly accomplished people to serve?
DB: The power of FSI is that we bring together financial advisors and the executives of the firms that serve and license those advisors to get them to work together to achieve shared outcomes.
Our board reflects the diversity of our membership. The common denominator is the passionate support of the independent FA model in its various iterations. There are numerous firm sizes and ownership structures, but all in support of that key business model, which provides services to a broad cross-section of clients, especially middle American clients.
JG: Speaking of middle Americans, how important is it to FSI to monitor the performance of the stock market, the slow growth in the economy, the persistently high unemployment rate?
DB: It’s important that we understand all the external dynamics and factors, like the economy, unemployment, the markets. But think of it: 25 years ago we were talking about how critical it was to [help advisors’ clients] save for retirement, care for aging parents and do college funding planning. They’re all important for an advisor to understand, to keep her eye on all those things as well. Those fundamental dreams and desires and needs—such as honoring the generation that went before by taking care of them in their old age—haven’t changed.
JG: What about the demographics of financial advisors and their clients? We know the average advisor is in their 50s, and their clients are generally older as well. Where will the next generation of advisors come from? How will advisors attract the next generation of clients? Is your focus on social media part of where FSI fits in on these issues?
DB: The demographics of older financial advisors and clients is a hot topic with all our firms and financial advisors, as is social media. Who will be the next generation of advisors? Who will be the next generation of clients?
The next generation of clients will want the same things [from advisors] but delivered in a different way. In addition to the advocacy that we focus on all day, every day, FSI also serves as an industry think tank on those types of issues.
JG: The interesting thing about FSI is that these firms all compete with each other, yet they come together on issues of common concern.
DB: The great thing about FSI, and perhaps it isn’t necessarily unique, is that people in this business have always been willing to set aside the competition and talk about those best practices and common challenges to come up with industry-wide solutions to those issues. Actually, not every solution has to be industry-wide; sometimes the solution is firm by firm, advisor by advisor, figuring out what’s going to work, coming up with innovative solutions.
JG: On areas like social media, it seems that the larger broker-dealer firms have a much better handle on how to incorporate social media in a compliant way, while smaller firms are holding back, often out of compliance concerns.
DB: Our small firm leaders, those who are succeeding, know what makes them unique—they’re not trying to compete with the large firms. For all size firms, FSI is a forum where they can learn from each other.
JG: Beyond the past year’s accomplishments that I mentioned at the start of our conversation, what else has FSI accomplished that might have escaped some readers?
DB: We’ve deepened our engagement on several state issues—social media, transaction taxes, in Minnesota on registration and licensing. The pinnacle of that success this year was legislation in Florida, where we worked with the state Office of Financial Regulation, the state legislature and the governor to make Florida a notice-filing state [Ed. Note: The legislation was signed by Governor Rick Scott in June]. That means advisors don’t have to put their entire business on hold for days or weeks [during the process of applying to make certain changes to their business, such as when advisors change their broker-dealer affiliation].
JG: Are there any significant issues that FSI will be focusing on in 2014?
DB: While there are no significant new issues that are on our radar right now, seeing this DOL reproposal through will obviously be a high priority next year. We’ve also built significant bipartisan momentum [on the DOL fiduciary reproposal] and have made great headway on educating members of Congress on our business model. We’ll be sure to keep our eyes on proposals that would change the independent contractor rules, which would affect our members’ fundamental business model.
Our focus on state legislators and regulators won’t change any time soon. They’ve always been important, but are becoming a bigger factor in the cost and complexity of the regulatory environment. We’re committing resources to engage on behalf of our members [in the states] and we’re encouraging FSI members to build relationships with key lawmakers and regulators.
JG: There are elections next year—a third of the Senate seats will be in play. Will FSI be involved in those and any other races in 2014?
DB: It’s funny: Elections have a way of fine-tuning legislators’ focus on their constituents, so we’ll take advantage of that opportunity. I like to say that if you like your representative, in addition to voting for them, give them money to support their reelection. I’m also encouraging advisors to run themselves. It’s a great opportunity to give back to their communities and get involved.
JG: It would seem that the skills advisors have would be helpful in government—in planning, in budgeting, in helping people to make decisions that are good for them in the long run.
DB: Speaking of advisors’ skills that would be helpful in government, being able to understand and listen to their clients [would be valuable].
JG: How are plans going for the January OneVoice conference [which will be held in Washington from Jan. 27–29]?
DB: Washington is the perfect place to celebrate our 10th anniversary, and registrations are looking very good.