The Advisor's Advocate

The beginning of a new year is always a good time to catch up with Dale Brown, president and CEO of the Financial Services Institute. Brown, FSI and its members are taking up the regulatory flag to ensure independent broker-dealers and their advisors have a voice on the issues that concern them coming out of Washington. As this is our career guide, how said issues affect your business should be readily apparent.

Q: What have been the key wins for FSI in 2011?

A: 2011 was a break-out year for FSI, and we see 2012 as equally important. I’ll quickly summarize how FSI has impacted Washington and the states this year.

We successfully advocated for the withdrawal of the Department of Labor’s (DOL) proposed rule which would have redefined the term “fiduciary.” We forestalled, indefinitely, the SEC’s threatened reform of 12b-1 fees. FSI also influenced the Dodd-Frank-mandated SEC Standard of Care study which referenced FSI’s recommendations over 30 times. And we feel very good about successfully advocating for the repeal of expanded 1099 reporting requirements.

Q: And membership numbers?

A: We doubled financial advisor membership to over 30,000, which has had an impact beyond just the numbers. We were able to generate over 4,000 personalized letters from financial advisors to President Obama and met with over 260 congressional offices during our Advocacy Summit. We also spearheaded the election of over 51 FSI members to the FINRA Board of Governors, FINRA District Committees and various FINRA committees. It’s been a busy year, to say the least, and one that has continued to put FSI on the map and make us the go-to source for policy makers and regulators on our issues.

Q: How would you describe the regulatory environment at present?

A: Unfortunately, it is one of uncertainty rather than clarity. All businesses, including independent financial advisors and the independent financial services firms that serve them, need a degree of certainty so they can plan and manage their businesses effectively. Too many important regulatory issues that have a real impact on clients as well as our members’ businesses remain unsolved.

I am also alarmed by the misunderstanding and unnecessary hostility toward the financial services industry. While not a single independent financial advisor or broker-dealer caused the financial crisis, our members are experiencing the unintended consequences of the legislative and regulatory overreaction. This hurts our members and has the potential to dampen our economic recovery and hard-working Americans’ ability to plan for the future.

The DOL’s fight to redefine the term fiduciary is a clear example of a misguided overreach by regulators who do not understand our industry. If this flawed rule is adopted, 19 million American IRA holders would have to turn to the Internet or their brother-in-law for their financial advice at a time when everyone needs access to affordable, unbiased advice.

We also have an opportunity to improve the regulatory environment for clients and the industry. That’s why we’re advocating for FINRA to be the SRO for RIAs. Currently, advisors affiliated with independent broker-dealers are examined by FINRA once every two years. The SEC only examines RIAs once every 11 years and, amazingly, the SEC admitted this year that one-third of RIAs have never been examined. That needs to change for investors to have full faith in their advisors and our industry.