With national issues around the fiduciary issue and tracking transactions either on hold or in the hands of regulators, the Financial Services Institute is looking to begin influencing issues that hit brokers at the state level - like the filing fees charged to brokers and crowdfunding regulation.
FSI is monitoring state proposals around retirement, transaction tax proposals, financial elder abuse, financial literary, and independent contractor status. “There are 42 states already in session currently,” FSI’s Robert Lewis, head of legislative affairs said Tuesday at the FSI OneVoice 2015 Conference in San Antonio, Texas. His team is tracking about 100 bills on the state level and actively putting advisors in front of legislative and regulatory bodies to have conservations around the issues. "State issues will impact you a lot faster than federal ones will," he says.
Robin Traxler, head of regulatory affairs for FSI, says the 35,000-member organization is working to convince Texas to reduce filing fees for broker/dealers. In Texas, it currently costs firms about $285 to file, while in other states it’s usually about $50, Traxler said. “The fee issue is really unique to Texas; they have the most expensive fees for advisors of any state,” she says, adding that the state commissioner was really open to advisors’ concern.
Additionally, FSI is also working with state regulators on issues like intra-state crowdfunding. “Our members would really like to stay out of the crowdfunding space and make sure their clients are aware of the risks and states are doing what they can to educate investors on what crowdfunding ventures are,” Traxler says.
The focus on state issues comes as the industry is still awaiting a new DOL proposal that would require advisors overseeing retirement plans to act under a fiduciary standard. “We are really waiting to see the next version of their proposal,” said David Bellaire, general counsel for FSI.
Last week, a leaked memo from White House senior advisors seemed to support a proposal from the DOL, reporting that research showed investors could be losing 10 to 15 percent of their potential retirement savings because of conflicted advice from brokers.
“I have to say the White house memo wasn’t encouraging; it was a slanted view of our industry," Bellaire said. “It essentially characterized financial advisors as preying on their clients and that the effect of their advice was that people have to work longer to retire and that’s an unfortunate way to look at the work our members do,” he says, adding that obviously FSI disagrees with the memo’s implications.
In November, FSI requested and received a meeting with senior White House officials and took a small group of advisors to meet with officials to discuss the potential impact of the regulation.
FSI’s President Dale Brown admitted that following the leak of the memo, he was more suspect that the FSI meeting would have a lasting impact. “We’ll see if it was helpful in the final outcome,” he added.
But FSI is definitely expecting the DOL to move. "It's a matter of when and not if," Lewis says, "We’re hearing an increased chatter about this proposal." Once the proposal is released to the public, FSI will review it to see if the DOL staff is as surgical as they claim they will be, Lewis says. "We’re going to give them the benefit of the doubt up until we read it," he says.
On the issue of FINRA’s Comprehensive Automated Risk Data System (CARDS), the industry regulator is currently reviewing and digesting the comment letters submitted by the industry and the public.
Bellaire noted that he doubted FINRA will drop its CARDs initiative, but added there could be substantial changes to the proposed regulation in light of the comment letters, especially around data security. He expects that next version will provide new information and provisions to provide industry and investors greater confidence. “We’ve got a lot of work to do before the proposal is at a place where our members would be comfortable, but we do support the investment protection goals and want to work with [FINRA]."
