Some states plan to sock investment advisors with higher fees to help boost their ailing budget deficits. Michael Herndon, director of the CFP Board’s Government Affairs Office, says that over the past seven years, he’s seen maybe one or two states levy fee increases on advisors, but in this year alone, he reports, “I’ve seen several.” Alabama, Arkansas, Montana, Nevada, New Mexico, Oregon, Texas, and West Virginia each have legislation pending in their state legislatures that would hike fees on advisors.
Some of the proposed fees are more onerous than others. Karen Barr, General Counsel for the Investment Counsel Association of America (ICAA) in Washington, is particularly concerned about two bills in the Texas legislature, House Bill 1840 and Senate Bill 1060. The House bill would raise advisor renewal fees from $40 to $100 and boost their notice filing fees from $75 “up to” $100. Barr told the Texas State Securities Board in a recent letter that the ICAA opposes the fees because Texas already “charges the highest aggregate fees in the nation for registration and notice filing of investment advisers and investment adviser representatives.” The current investment advisor rep renewal fee of $220 in Texas is more than “four times the average of other states,” Barr said. And, she said, fees paid by the securities industry “generate more than enough funds to cover the costs of administering and enforcing the State Securities Act.” In fact, according to the Securities Board’s annual report, Barr notes, the board raised in excess of $98 million more than its cost of operations.
Denise Crawford, Texas Securities Commissioner, says she “hates” the fact that Texas has the highest fees in the nation, but the Securities Board has little control over the fee changes. “The ICAA is livid about [the fee hikes], but there’s nothing we can do at the Texas State Securities Board,” she says. “We have a huge budget deficit and we don’t have a [state] income tax. The legislative leadership and the governor and lieutenant governor have said no new taxes this year, so they’re going to raise fees for services, licensing fees, and make changes in franchise taxes, which could have affected investment advisory firms, though we were able to keep that from happening,” she says. “So it’s fair to say that almost every fee in the state is going to go up.” Crawford says the state legislature plans to fund the Securities Commission with the new fees. The state legislature is “trying to make us a self-funded agency.”
Crawford says Texas would have the lowest fees in the nation if it weren’t for legislation that was passed a few years ago that created a $200 “professional fee,” which is levied on top of the licensing fee. “That’s what kills us here in Texas.” But Crawford says she’s certain the House bill will pass.
Barr says the ICAA objected to Senate Bill 1060 because it would subject SEC-registered investment advisors to criminal penalties for failing to register or notice file and pay fees under the State Securities Act. After much uproar, the bill has been amended to state that it’s “still a felony for failure to register [with the state], but it no longer makes it a felony for SEC registered firms to fail to notice file in Texas,” Barr says.