Indie B/Ds Inching Forward With Regulators
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The independent broker/dealer channel is still fighting a decades-old battle. In Chicago this morning, the fourth annual SIFMA Independent Firms Conference opened with remarks from industry executives whose speeches seemed to underline a familiar theme: the challenges of compliance for independent firms.
It’s tough to tell whether the industry is getting very far in easing the compliance burden for firms and their reps, but Valerie Brown, executive vice president of wealth management and retail annuity markets at ING, says SIFMA’s Independent Firms Committee is at least opening up a dialogue with regulators, and educating them about the independent space. In her welcome speech to an audience of about 100 attendees, Brown said that in the last year, the independent firms committee (of which she is a member) was able to address hot topics—such as Rule 2821 and Regulation S-P—with regulators. “Regarding Rule 2821, which is important to everyone here, we didn’t get everything we wanted, but we were able to get a dialogue going on what matters to independent firms,” Brown said.
Brown also highlighted the committee’s April 30 meeting with the SEC and FINRA, which addressed the problems associated with dual regulation of investment advisors and b/ds. “They are overlapping and need harmonization. We saw the light bulb turn on for the SEC during that discussion. No one really knows when a harmonization of the regulation will happen, but we do know it will take some time,” she added.
Just how much clout the independent firms have over regulators and lawmakers is uncertain. In his keynote speech, Bill Dwyer, managing director and president of Independent Advisor Services at LPL Financial, acknowledged that the independent b/d industry “has never been in the sexy part of the financial services industry.” Independent firms and their reps, he says, typically serve America’s affluent and mass affluent, and therefore don’t have huge profit margins to work with. “That being the case, it’s harder to wield lots of influence. Instead, we need to educate the regulators about how important the independent channel is to the average client,” Dwyer said.
Regardless of his attempts to rally the independent troops, during a question-and-answer period, one gentleman asked Dwyer when LPL would put an end to “misleading and insulting” advertisements that boast a 98 percent payout. Dwyer responded by saying, “The reality is a rep can get there.” He went on to say LPL’s typical rep earns a net payout of between 60 to 65 percent, according to a commissioned Moss Adams study.
