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May 05, 2014 at 08:00 AM
Skip Schweiss knows advisors. Skip Schweiss knows retirement. Skip Schweiss knows Washington. Skip Schweiss knows fiduciary. He also has a long title that reflects that knowledge — president, TD Ameritrade Trust Co., and managing director, advisor advocacy and industry affairs at TD Ameritrade Institutional — along with deep experience and insights on all those topics.
So we asked him whether this could be a pivotal year for rulemaking on the fiduciary standard and redefinition at the Securities and Exchange Commission and the Department of Labor. “I could spend an hour answering that question,” he said. When he gets “questions on the fiduciary standard from advisors, I say it’s like the duck going across the pond: On the surface, nothing seems to be going on, but underneath there’s a lot of action, though right now there’s no movement.”
While he agrees it could be a pivotal year, his caveat is that “it’s a midterm election year, so politicians won’t be doing anything.” Since “Congress by law has to approve an SRO for an industry, you won’t see that this year” either (sorry, FINRA).
What about more SEC funding, which the commission says it needs to do a better job of examining RIAs? “Every year, Obama asks for a 25% budget increase” for the commission, but “they don’t get it.” That’s because the budget dollars come out of the House Financial Services Committee, and “the Republicans won’t give the SEC a 25% budget increase.”
And the SEC? “Mary Jo White hears [about fiduciary] everywhere she goes, but she’s got a lot on her plate” that has a higher priority, such as the high-frequency trading issue. That form of trading has become an even hotter topic in Washington and on Wall Street since author Michael Lewis’ recent claim that the “stock market is rigged” in favor of those traders.
At the time of our interview in April, Schweiss mentioned that White had said only two weeks prior that “she’s directing her staff to determine whether to move ahead with a rulemaking,” a “threshold decision.” The battle over imposing a fiduciary duty on stockbrokers when giving advice “has been fought for a decade,” Schweiss said, and the Dodd-Frank Act “has come up to its fourth birthday.” So will the commission proceed with that threshold decision? Schweiss suspects “we’ll get that decision this year. She could say, ‘We won’t proceed,’ or she could say, ‘We’ll do it next year.’”
The Department of Labor, he pointed out, “has a simpler mission—to protect retirement plan participants and workers”—than the SEC’s three-part mission, which too often “can conflict with one another.” While the DOL said its fiduciary redefinition will come out in August, Schweiss said, “I’ll bet you it doesn’t happen then, and not before the election, but maybe shortly after the election.”
When asked about the claim presented by broker-dealers that a change in the DOL fiduciary rule might lead them to get out of the retirement advice business, Schweiss was incredulous. “When the brokerage industry says ‘If this passes, we’ll back away from the retirement market and the IRA market,’ well, there’s $7 trillion” in retirement plans and IRAs, “much of which is in brokers’ hands. If they’re sincere, what a seismic shift” it would be, he said. Addressing the expressed fear of the broker-dealer community that any redefinition would outlaw commissions, he responded that the DOL’s Assistant Secretary for the Employee Benefits Security Administration, Phyllis Borzi, “has consistently said, ‘We’re not taking away commissions.’”
