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Industry Spotlight > Broker Dealers

Who's looking out for us? Part three

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In my angst in the previous column — Who’s looking out for us? Part two — I was on the attack and mentioned FSI, the Financial Services Institute, along with other organizations. This mention generated a pleasant phone visit with Justin Nazari, FSI’s securities regulatory affairs counsel. He pointed out that FSI exists to represent both broker-dealers and representatives in Washington. In other words, FSI helps broker-dealers and financial advisors in working with government. FSI has nothing to do with representing broker-dealers in disputes with advisors, nor the reverse. Mr. Nazari is a nice guy, good to visit with. 

FSI did work for about five years about the fee raise by at least one broker-dealer for one-representative shops, and the final government approach turned out to be somewhat of an accommodation, thanks to FSI’s work. In other words, the deal would have been worse had FSI not been representing both BDs and advisors. I apologize for getting that wrong. (It’s good that I’m a member of FSI, right? How mad can they get at an actual member?)

The last rant

Probably not the last, but maybe the last on this subject for a time; I do get off on issues from time to time. My annoyance? I still think there is no one who represents representatives, at least in terms of relations with our broker-dealer “employers.”

Why are we “employees?” We don’t seem to get employee benefits, and we contribute large sums in concessions and fees to broker-dealers. The no-longer-permitted block transfer is symbolic of that lack of representation, as is the identification of our customers as broker-dealer customers. The elimination of 12B1 fees for many of us was just another income-cutting measure, even though the idea itself almost certainly came from regulators. 

I actually like my broker-dealer, which I got to through a strange accident. I’ve decided the broker-dealer/advisory model is a good one for me — if I traveled the RIA route, I would not have all the built-in protections that are carefully put in place by my BD/advisory firm. I’m not so much picking on BDs as I am arguing for some sort of representation for us reps and IARs. I certainly would not enjoy the technology.    

In my opinion, BDs and BD/advisories are necessary and good. I simply get weirded-out at having all the power on one side of a two-sided equation. Gee, we’ve got a serious tilt, given the SEC, FINRA and our broker-dealer/advisory firms, which at times appear to all be anti-rep.  

It seems likely — in my reading of the tea leaves — that RIAs will come under closer scrutiny going forward — so larger ones that are federally regulated will have to be on their toes. I’m not sure about state regulation, which I guess will vary all over the map, dependent on each state.                 

Have a sensational week, and if you write a blog about associations, maybe it’s better to just call them “organizations,” kind of generically, without mentioning names. Hey, I was wrong about FSI.  

For more from Richard Hoe, see:

Who’s looking out for us?

Buy & hold vs. financial behavior: ‘Frontline’ asks the wrong questions

Adventures on Wall Street


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