ABA Conference: Wealth Managers Grappling With Dodd-Frank Act

Wealth managers working for banks are grappling with the fallout of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, according to top banking officials speaking at the opening general session of the American Bankers Association’s annual Wealth Management and Trust Conference in Miami Beach this morning.

Wealth managers working for banks are grappling with the fallout of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, according to top banking officials speaking at the opening general session of the American Bankers Association’s annual Wealth Management and Trust Conference in Miami Beach this morning.

For example, the impact that the new Bureau of Consumer Financial Protection will have on bankers is still uncertain, said James Marion, managing director for U.S. Trust, Bank of America Private Wealth Management. The Bureau, which regulates and examines the provision of consumer financial products or services, is still in the process of defining who exactly meets the definition of “consumer” and who should be regulated, Marion said.

If the Bureau decides that trustees are consumers, the result would be “very significant” for bankers, according to Marion, who is also the conference chairperson. But because retail consumers of financial services are a greater priority for the Bureau and its head, Elizabeth Warren, it may conclude that regulating trustees is beyond its present scope, he added. Marion also noted that the Consumer Financial Protection Bureau is coming under close scrutiny by a conservative Republican House of Representatives that is not sympathetic to regulation. Any decision about regulating trustees, he concluded, was unlikely to be resolved anytime soon.

As a result of Dodd-Frank, the Securities and Exchange Commission may now request documents relating to custody of registered investment advisor client assets from banks, noted Marion and Phoebe Papageorgiou, senior counsel for the ABA’s Center for Securities, Trust and Investments. Wealth managers at banks are already feeling the impact of the new law, as the SEC has begun to ask for “client-level detail” that wealth managers have not had to provide in the past, Papageorgiou said.

Marion and Papageorgiou urged wealth managers at the conference to pay close attention to an upcoming General Accounting Office study mandated by Dodd-Frank on compliance costs of the SEC custody rule. If the rule and the SEC’s definition of an RIA client is applied too broadly, Marion argued, it could prove “really troublesome” for bankers’ wealth management business.

Marion also took a shot at the SEC’s controversial study on the broker-dealer standard, which concluded that broker-dealers should be subject to the same fiduciary standard as RIAs when providing specified advice on investment decisions.

The conclusion was “ill-advised,” Marion said, and would “engender further confusion” because it did not differentiate the stricter fiduciary standards bankers are held to by state laws. The ABA has proposed that the SEC abandon the label of fiduciary standard in favor of a “best practices standard” that, Marion said, would emphasize a financial advisors obligation to put the client’s best interests first.

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