Ken Fisher’s Backhanded Call to Arms

Ken Fisher’s recent interview with ThinkAdvisor certainly caught my attention. Given the fact that I’ve spent the last 17 years of my career representing the interests of SEC-registered advisory firms in Washington, DC, my first reaction was purely defensive. But I’ve calmed down and now wish to address some of Mr. Fisher’s more provocative statements. In doing so, I hope to challenge investment advisory professionals to take action to help ensure that his dire predictions do not come to fruition.     

Fisher Quote 1: “The RIA world is at threat of being taken over by BDs in a regulatory sense.” 

I agree. Our organization has warned of the serious legislative and regulatory threats from the broker-dealer industry and FINRA (formerly NASD) for many years. As just one example, I distinctly remember testifying at the SEC’s roundtable of investment advisory issues back in May 2000 and discussing issues relating to fiduciary duty as well as the threat of a self-regulatory organization (SRO) from NASD.  

More important, we’ve done much more than just talk about it. We have written numerous comment letters and met with SEC commissioners and staff. We have testified on Capitol Hill. We have worked with state securities regulators, consumer groups and other industry groups to make our message heard. We have urged our members and other investment advisory firms to get involved in these critical policy debates. I believe that serious threats from the broker-dealer industry and FINRA still exist. But any objective analysis of the evidence would show that these threats have been out there for a long time. If it weren’t for efforts by our organization and others, the threats would have come to fruition by now.                

Fisher Quote 2: “There’s a good chance that the entire RIA world is gone in 10 years.” 

If Mr. Fisher is literally suggesting that the SEC-registered investment advisory universe will disappear, he’s clearly wrong. All indications, including demographics in the U.S., indicate that the demand for investment advisory services will continue to increase during the next decade. So maybe what he is saying is that the current composition of the investment advisory profession will disappear or change dramatically as more and more brokers basically appropriate and re-define the investment advisory profession.

Change is inevitable, but I still think that predicting the end of the RIA world is unlikely at best. 

By the way, I’m not sure what Mr. Fisher means when he uses the term “RIA.” His firm is registered with the SEC as an investment adviser and thus is an “RIA.” I doubt that he is predicting the demise of his own firm within the coming decade, so he may be using the term “RIA” to mean something else – perhaps smaller advisory firms. 

I’ll make two quick points. First, others have predicted the demise of smaller advisory firms and been proven very wrong—some of you old folks may remember the infamous Goldman Sachs-Mark Hurley study in 1995 that basically predicted that firms below $5 billion in AUM would go the way of the dinosaurs. Second, separating “RIAs” from larger investment advisory companies is one big reason that the investment advisory profession is not as effective at lobbying as the broker-dealer industry.  

Fisher Quote 3: “The RIA world is [naïve] in thinking implementation of the fiduciary standard will be done in ways that will impede the BDs and help the RIAs. That’s stupid, wrong and backward.”