Banks' Bad Rap Dampens Advisor Recruiting: SIFMA Panel

The regulatory environment was a big concern of SIFMA panelists.

Hunt said some proposals in the regulatory pipeline would help boost investor confidence. And she echoed Mary Jo White’s comments to the SIFMA audience in which the head of the Securities and Exchange Commission said the agency would follow a policy of zero tolerance for misbehavior, saying this was a good thing.

Taft said a fiduciary standard of care written properly was the way to take the high road; one written badly could be a disaster. Section 913 of the Dodd-Frank Act should be the standard of behavior, he said.

Section 913 would impose the same fiduciary responsibilities on broker-dealers that apply to investment advisors. The SEC has been tasked under Section 913 with developing such a rule.

White said this mandate had a high priority on the agency’s agenda. It was important to have a single standard, she said, so that investors would receive the same quality of advice from both advisors and broker-dealers. In the meantime, the Department of Labor is developing a separate proposal that would extend fiduciary responsibility to advisors of retirement plans and plan participants.

Taft called the DOL’s effort the “worst single proposal,” saying it would take the small saver out of the market. Criticism of the proposal has also swelled on Capitol Hill. In August, 10 Democratic senators urged the White House in a letter to delay the DOL proposal until after the SEC had acted. They worried that the two agencies were working at cross purposes, to the detriment mainly of Main Street investors.

The House of Representatives has passed the Retail Investor Protection Act, which would require the DOL to wait for the SEC to issue its fiduciary rule — and would add several extra steps for the SEC before making the rule. The bill stands little to no chance in the Senate.

White said she had entered discussions with Labor to achieve consistency in rulemaking.

Taft noted the biggest complaint he had heard from advisors was that they spent more and more time on administration. He said that how firms navigate through the onslaught of regulations would be a big differentiator among them.

Firms must have processes in place to do this, he said. They must get input from the field, and rely on teaming and technology.

Christiansen was less exercised by the increasing regulatory burden. He said he assumed a harmonized fiduciary standard would eventually be put in place, and this would be aligned with advisors’ best practices.

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Check out No Institution Too Small to Escape Scrutiny, SEC Chief Tells SIFMA on ThinkAdvisor.