Paul Reilly, chairman and CEO of Raymond James.

Raymond James Chairman & CEO Paul Reilly is very critical of states’ plans to issue their own fiduciary rules.

In a media briefing via phone following his town hall at Raymond James’ annual conference for independent advisors, Reilly explained how regulatory pressures – and state fiduciary laws in particular – are advisors biggest concerns.

“If you could imagine – and I’ll be on an extreme here – going from today’s FINRA’s standards to having a best interest in 50 states standards – which is the other extreme. You’re going to get concerned about how you’re going to operate in that kind of complex environment,” Reilly told media. “There’s a lot of concern with what’s happening [regulatory-wise] and all those changes.

Early this year, Nevada proposed fiduciary regulation and may be first state to adopt a fiduciary rule. Nevada’s proposal was hit with early criticism from Mortan Stanley and TD Ameritrade, who warned they would stop serving customers in Nevada if the state moved forward.

New Jersey followed by proposing its own fiduciary rule that requires all investment professionals registered with the state’s Bureau of Securities to place the interests of their clients above their own when recommending securities or providing investment advice.

According to Reilly, Raymond James feels that standards by state are both confusing and costly.

“Advisors have clients all over the place and if you have different standards in every state it becomes extremely difficult for advisors to serve their clients,” Reilly told media.

Reilly said that as an industry and as a firm they will be “very clear” in opposing state standards if they’re not good for clients.

Similar to the firm’s opposition to the former DOL-proposed fiduciary rule, Raymond James feels the state standards are bad for clients.

“I believe DOL [fiduciary rule] – and people converting a lot of clients from commission to fee-based – actually cost them money, but it was a way to get DOL-compliant. I think the fiduciary standard as written in some [states] would do the same, and I think it would cost the client money,” Reilly said.

Rather than state standards, Reilly stands behind the federal preemption under securities laws to have a fiduciary standard be mandated centrally in the financial services industry.

“The industry isn’t convinced that it’s legal for states to have their own standard,” he told media. “We do have federal preemption and securities regulation. My guess is we will have to go through that when [the SEC’s best interest standard] comes out. To say, ‘what are the options or recourse for states passing rules that many of us feel they don’t have the right to preempt federal law?’”

Ultimately, Reilly said this may mean challenging the state standards in court if need be.

“We’re going to wait for best interest to come out and then find out what all the states and what they do – and either through talking with them or through the courts to uphold a federal standard,” he told media.

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