What's going wrong for RIAs on Capitol Hill?
RIAs brace themselves as Senate committee takes up financial reform
2 min read- Senate draft proposes advisor/broker-dealer regulation harmonization, extending fiduciary duty.
- House legislation amendment shifts 4,500 dually registered RIAs to FINRA oversight.
- Edelman cites lack of coordinated representation as RIAs' key challenge on Capitol Hill.
The Senate Banking Committee yesterday released its draft of financial regulatory reform, and it includes measures to harmonize regulations of advisors and broker-dealers and extend the fiduciary duty to broker-dealers.
It looks good on the surface. But then, so did the House Financial Services Committee legislation draft when it was released.
What ended up passing was a bill termed “pretty bad” by David Tittsworth, a low-key Kansan who is the executive director of the Investment Adviser Association and probably RIAs’ leading advocate in Washington. Advocates were particularly upset by the last-minute addition of an amendment to shift 4,500 dually registered RIAs to FINRA oversight.
Eight things necessary to keep RIAs from answering to SIFMA
Tittsworth called the amendment’s underlying assumption that FINRA oversight might have prevented or limited the Madoff disaster, “horse shit.”
The House legislation may be even worse than advocates thought last week: As experts study the draft legislation even more, they are worried that by its specificity, the legislation may actually weaken the existing common-law based fiduciary standard.
Story Timeline
Roughed up
RIAs have the potential to get roughed up even more on the Senate side, where traditional Wall Street firms have always held a lot of sway.
Worst of both worlds looms for RIAs in Washington
Events beg the question of what’s going wrong on Capitol Hill for RIAs? Over the summer, I interviewed Ric Edelman, one of the nation’s largest RIAs, based in Northern Virginia. We talked briefly about the rocky terrain for RIAs in Washington. When I asked him for his thoughts about the latest turn of events, he had these to share:
“The financial planning profession lacks effective representation on Capitol Hill. There are too many organizations, and they have failed to coordinate their efforts or even to reach agreement among themselves regarding key issues.
Organizations suffering from internal disarray are ignored by legislators and regulators. Until the planning community resolves its own organizational issues, planners and their messages will continue to be ignored.”
Genteel collection
The people who work for RIA and financial planning organizations are a genteel collection of professionals, not apt to criticize each other. But privately, advocates express similar thoughts: lobbying for a fragmented industry makes a difficult task even harder.
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