SAN DIEGO - Using its muscle to influence the debate as federal officials gear up to establish tighter regulations on the advisory world is the Financial Services Institute’s top priority this year, organization executives said Tuesday at the group’s annual conference.
The institute, whose membership has ballooned to 35,000 advisors, is focused on how to “mobilize our members to be engaged in our advocacy mission,” FSI President Dale Brown said. With the debate over whether to establish a fiduciary standard for advisors expected to be revived this spring, “Our members need to use their voice collectively, together,” Brown said.
Attracting record turnout of more than 750 members to the conference, FSI leaders crowed that the institute’s budget this year of more than $7 million is double the level of 2010. “We’re in a great business with huge opportunities we’ve never seen before,” said Larry Roth, the new chairman of FSI, who’s also CEO of Advisor Group.
Regarding the fiduciary battle – in which advisors could potentially be sanctioned if laws are written to require that every move made on behalf of a client conform with a fiduciary standard – Dave Bellaire, executive vice president and general counsel of FSI, said the group expect details from the Department of Labor to be disclosed in April with the debate fully engaged by July.
For now, “They’re holding their cards close to their chests, so the parameters of the proposal are unclear to us,” adding at a news conference Tuesday that “the term fiduciary is not a single definition, it’s really a spectrum.” In an interview with Financial Planning, Bellaire, who’s worked in the wealth management business for more than 20 years, added that it seems some regulators think too many advisors have a conflict of interest in guiding their clients.
“We think the underlying presumption that that advice is conflicted is wrong,” he said. “Our financial advisors work in Main Street USA, their offices are downtown of their hometown, their business relies upon their reputation in that community. Trying to sell this investor a mutual fund that pays 25 basis points more in a commission is not worth the reputational risk associated with that type of activity. I don’t think that’s the type of calculation that our financial advisors make when they met with clients. They’re focused on how can I help this person, how can I help them so that they tell their friends and family about the good work I did for them, not about trying to squeeze every nickel that they can out of the clients that come in the office.
“If the Department of Labor’s proposal looks like it did when it was first released in October of 2011,” he added, “I think the end result of adopting that rule will be to restrict access to advice, products and services that people need to achieve their retirement goals. I think investors want advice, I think they want to work with a trusted professional. ... The Department of Labor’s proposal would interfere with those on the most important issue that most people plan for in their lives, which is a safe and secure retirement.”
FSI’s other top priorities this year will center on whether advisors affiliated with broker-dealers should be classified as independent contractors. The issue is conflicted, FSI officials said, because advisors are getting lumped in with “FedEx drivers and construction workers.”