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Industry Spotlight > Broker Dealers

The Road Ahead

By Robert Scott Martin

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Research: What’s facing the FSI and the industry in 2007 and beyond?

Simmers: The No. 1 challenge — from the Financial Services Institute’s point of view — is to be a constructive voice in the industry. We need to continue our path toward growth in terms of both corporate membership (the broker-dealers) and the individual membership, with an emphasis on the individuals. The FSI is structured to be interested not only in issues that impact member firms, but the issues that impact individuals. There are 500,000 registered representatives out there, after all, versus 5,000 broker-dealers.

The face of the industry is changing before us. You have new stewardship at the SEC and a new chairperson at NASD. They’re talking to each other. You have advisory rules and regulations being compared to broker rules and regulations. People are talking about different definitions of “fiduciary.” You have an insurance industry that’s focusing more toward a suitability standard than on a market conduct standard, which is a big change.

Want to take the insurance piece first?

My perspective on it is that clearly insurance is a valuable service and it’s going to be available throughout our careers. But the distribution model may be changing and that’s because of the way participants are trying to build credibility and regulators are trying to establish orderly markets. One model that’s being reviewed is the broker-dealer model as a means that more effectively provides supervision over the sale of the product; we’re already seeing some evidence of this in the form of, for example, Allianz looking to distribute through broker-dealers instead of solely through the independent marketing companies. This is just an example of the way that things aren’t static. This is all happening right before us and in real time. The only issue is how far or how fast they should change.

What can we — you, the FSI, advisors, everyone — do to meet these challenges?

The FSI and I have been advocating that people get engaged. We think it’s very important to do your own due diligence. Don’t rely on what you hear; investigate the issues and understand the impact that every decision has on others.

Regulators are trying to make decisions that impact our markets and all the stakeholders in them. One-sided regulation rarely works, but if we’re engaged and understand the issues, the decisions can improve our overall market by inviting fair competition and assuring that reasonable prices and diverse products are made available to the public at reasonable cost. All the while building trust and confidence among the investing public.

Where are the opportunities in this for ING?

In the U.S. business, we do investment banking, we’re into banking itself, trust, asset management, brokerage, product manufacturing and investment advice. We certainly have the scale, since we’re Top Five in most if not all of those markets. In terms of awareness of the brand, it’s building. That’s important when you realize that the larger enterprise is really a conglomeration of a lot of companies and has only been in the United States as one ING brand since 2000. ING has built substantial integrity and transparency and disclosure into these businesses so it’ll have the basis for being that major full-service player in the coming years.

Like the parent brand, the ING Advisors Network is also an aggregation of businesses put together under one service model with four different value attributes. You’ve got brand recognition, integrity, a platform that enables you to easily do business and people that join for all the things you can offer: a career as well as a business relationship. We’re aligned with the advisors and their clients.

What will the industry look like in 2012?

I think all signs point to a better future. Certainly, we’re working toward (and expect to see) an improved regulatory environment, an environment in which we have informed regulators. We as participants will have more disclosure and are becoming more transparent. We see improved products in terms of everything from pricing model to the range of choices within the products. I see much closer customer alignment with the fiduciary responsibilities that we as advisors and financial planners have. Everyone is improving their technology platforms.

Ultimately, we see more competition within the financial services industry among banks, brokerage firms, advisors and insurance, which will provide better information to the investing public and better training to our employees and independent agents. I see more dollars available for investing in an environment better aligned to consumers’ interests,

And getting from here to there?

It’s very slow and very painful. You see convergence between asset management, advisory, brokerage and insurance regulation, both at the federal and state level. It’s incredible what’s going on, but the pain points for everybody seem very close to the surface right now. Which means we’re discussing the right stuff. The pain points come from the amount of work that has to come about in order to effect the changes that, predominantly, consumers are demanding, regulators are interpreting and the industry has to apply.

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