The tone of remarks made by Adam Antoniades, chair of the Financial Services Institute, at the group’s OneVoice 2015 conference did more than hint at the multiple hits the advice business is taking from legislators, regulators and political candidates.
“The challenge is none greater than the changing winds of public opinion,” said Antoniades, who is also president of the Cetera Financial Group, late Monday. “We are the platform for which campaigns are won or lost.”
The financial services veteran spoke directly to leaked comments from the White House concerning a Department of Labor proposal to amend the definition of fiduciary in retirement plans.
“The ignorance in the memo is shocking to me,” Antoniades explained. “For those who spend their lives in the industry, it is frankly offensive. Stay around and learn more about the leaked memo. It is likely to become a big focus of this group.”
The DOL fiduciary rule “is long awaited and now looming,” said FSI President and CEO Dale Brown, and the group is “well positioned to impact it.”
What’s the industry to do?
“We highlight the good we do, how the good outweighs the bad, and we come together to address what’s wrong and craft a solution,” he explained. “As industry leaders, we must be brave, bold and strong enough to take policies and positions founded on our core beliefs of how to engage clients in a conflict-free … manner.”
More broadly, Antoniades said, FSI’s mission is “to do advocacy around key legislative and regulatory issues that threaten the future of our industry.”
The group, which represents independent financial services firms and advisors, recently introduced an expanded program to offer life and disability coverage to its 35,000-plus advisor members.
At the state level, the organization successfully pushed back against two proposed securities taxes and is working to secure lower filing fees for investment advisors in Texas.
“We’ve earned ourselves a seat at the table and do not take this access for granted,” said Brown, who noted that the group’s operating budget now stands at $8.5 million vs. $3.5 million a few years ago.
“When it comes to the regulatory environment, advocacy is marathon, not a sprint,” he explained. “Since the crisis, we are just one sensational headline away from how regulators and Congress view the industry and our members in particular. We are positioned to win the long-run race.”
As for the Financial Industry Regulatory Authority’s proposed plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System, FSI contributed a lengthy comment letter relaying its critical thinking on the matter.
“Firms are very concerned that FINRA will use this data to second guess compliance departments, and we warned FINRA against any effort to duplicate firms’ efforts,” said Robin Traxler, FSI’s vice president of regulatory affairs, during a breakout session at OneVoice on Tuesday.
“Instead, the data should be used to understand the firms’ data and to better target [FINRA] exams and sweeps, so firms can then use the information,” Traxler explained.
FSI members also requested that the timeline for CARDS’ rollout and implementation be expanded to 30 months.
“We are a self-clearing [firm] and have a keen interest in this process, as do all of us in FSI,” said LPL Financial (LPLA) President Robert Moore, who acknowledged that he “gets the FINRA position.”
The CARDS proposal is still a work in progress, so “we continue to influence the process and are still very much alive when we have the chance to interject our opinion,” Moore added.
(LPL, for its part, opened a Washington office and hired a chief lobbyist in September.)
The group also is pushing for a 15-day period for firms to respond to FINRA regarding data errors, instead of seven. Overall, FSI has estimated that the average firm may need to spend $250,000 to $1 million to implement the system and more than $100,000 to maintain it.
A session on elder financial abuse highlighted legislation proposed on Jan. 14 by Missouri Secretary of State Jason Kander. It would give advisors the right to tell family members about questionable requests and transactions and to put a 10-day halt on disbursements.
“The [advisor's] firm must tell the Securities Division within certain timeframes, and the broker-dealer gets civil immunity regarding the disbursement,” said Andrew Hartnett, Missouri’s commissioner of securities, on Tuesday.
Overall, when deciding whether to stop one trade or freeze an entire account when fraud is suspected, Reif says do “what makes sense” in order to mitigate downside risk and limit exposure.
“There’s no playbook,” said Brandon Reif, a managing partner with Winget Spadafora & Schwartzberg. “The goal is investor protection.”
Large organizations like Wells Fargo Advisors (WFC), for instance, have procedures in place and a point person in the compliance department to call, according to Ronald Long, the group’s director of regulatory affairs and elder client initiatives.
“There’s nothing yet analogous [at the SEC] to the Missouri legislation,” said Rick Fleming, investor advocate for the SEC. “As for what’s best for us to do at the federal level, it’s about taking cues from what NAPSA [the National Adult Protective Services Association] is doing. Put a pause on [fraudulent transactions]. That’s the best approach.”
— Check out Andy Friedman: 7 Dates That Will Force Congress to Act on ThinkAdvisor.