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August 26, 2020 at 06:32 PM
Investment Advisor: How is the regulatory environment affecting your business? And is it pushing you more towards RIA vs. BD?
John Burmeister, Lion Street Financial president and CEO: Regulation — whoever’s in the office — is not going to go backwards. Where broker dealers and RIAs will succeed is they’ve got to have complete objectivity with the products that they offer. If you have a firm that is advisory only, it’s limited when it comes to what’s in the best interest of the client [even] if another product is suited [better] for a client’s needs.
Lion Street’s integrated platform with our life insurance side … allows us to be a little bit more nimble when it comes to regulatory changes. [Because of our] setup, we were able to minimize some of the expenses when [Labor's fiduciary rule] first came out.
We don’t have any proprietary technology, so we didn’t have to spend millions of dollars to change the system. We were able to operationalize the rule, and then we did the same thing with the Regulation Best Interest.
Reg BI was a bit more painful as we saw that regulation come to fruition, and we don’t know exactly how it’s going to be enforced. The biggest question is when enforcement comes and looks at what we rolled out as an industry, and when they go to our individual firms and offices, did we roll it out properly with what they envisioned?
Amy Webber, CEO, Cambridge Investment Research: I’m hearing that the SEC is already auditing firms, so buckle up. We all want to work together to make this work, [but] two weeks in and the first firm informed me that they had gotten an inquiry and [the SEC was] coming in to audit.
Regulation is going to continue to be an area of focus for all of us, whether we are on the broker dealer or on the RIA side. I also agree with John that my interpretation of what’s in the best interest of the client includes a firm be able to do both. So financial solutions holistically are probably the competitive advantage of the future.
And I’m not sure, at least in my career time, that the broker dealer side will go away. It’s just transforming and evolving. Gone are the days that a broker dealer [only executed] transactions. And, for the purposes of the future, focusing on both sides is important. If the administration changes it will get worse before it gets better.
I just think our industry is going to have to stand tall, continue to advocate for ourselves, get engaged, get our advisors out in front of them, continue to educate no different than we’ve been doing for the last, in my case, 30 years. There is value of advice overall … and we are going to be the ones that can help our advisors continue to do what they need to do.
We can’t sit back and let things happen to us, which is why much of the industry should be rallying around the efforts to get to the SEC, both on the broker dealer and the RIA side, to continue talking about this rule.
Tell us what to do, we will do it. We are a resilient industry that wants to do the right thing. But coming to us after the fact and adjusting an interpretation isn’t really what’s in the best interest of anyone.
Lon Dolber, CEO, president and CIO of American Portfolios Financial Services: Rule enforcement making by enforcement is a tough one. For my company, we’ve always emphasized our systems and platform and our “Lean Six Sigma” improvements.
That’s allowed me to move to the left and right with the rulemaking changes. We can attempt to influence the government through organizations like FSI, and [serve] on regulatory committees, but we can never be sure that our influence is going to get the change that we want.
I put a lot of emphasis on having an agile development structure at the firm, and we’ve been easily able to move [on] changes in our platform, whether it’s DOL, whether it’s Best Interest contracts. It’s a combination of proprietary systems that we own and operate and integrated systems.
As far as I’m concerned, I can’t totally control what’s going to happen with [regulation] — I can try to influence and that’s why we are members of FSI — but I can only control what I do [at my firm] 100%. How I conduct myself here, how I manage my firm and how I manage our processes and how structured and disciplined they are, that’s my control elements.
Ryan Diachok, president, Geneos Wealth Management: I agree 1000% that regulation through enforcement cannot be the new normal for our industry. That has to change because it doesn’t make sense. It’s not helping anybody.
I sensed the industry underestimated Reg BI in the early phase of it getting rolled out and all the nuances of it. Then [there was] this frenzied activity as we rolled up to the deadline.
