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Jan 13, 2010 3:32 pm


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          An irreverent Wall Street Blog
by Bill Singer

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Coalition Accuses Brokers and Insurance Agents of Spreading Misinformation

Written: January 13, 2010

The other day I read a sharp-edged and tartly worded document from, of all places, an apparent coalition of

the North American Securities Administrators Association (NASAA), the Consumer Federation of America, the Certified Financial Planner Board of Standards, Inc., the Financial Planning Association,  Fund Democracy, the Investment Adviser Association, and the National Association of Financial Planners Association. 

Not exactly the rabble of Wall Street.  The title of their position paper says it all: 

There They Go Again:
Brokers and Insurance Agents Are Spreading Misinformation About
the Senate Regulatory Reform  Bill's Fiduciary Requirement for Investment Advice.

Wow --- and they say that I don't pull my punches? 

In case you haven't heard, there is a nasty fight brewing between

the broker-dealer community and the financial planning/investment advisers community;  those espousing the historic Fiduciary Standard and those clinging to the Suitability Standard; and FINRA (and its allies, most notably SIFMA) and the Financial Planning Coalition (the CFP Board, FPA, and NAPFA). 

This is not just a minor tiff between competing industry interests but a fight for the future of Wall Street.  Much is at stake. It may well be a fight to the death.

While a number of salvos have already been lobbed back and forth in this war, the signatories to the There They Go Again memorandum have raised the pyrotechnics up a notch. Consider this excerpt, an in-your-face haymaker at FINRA:

Myth: FINRA should be recognized as the SRO for investment advisers in order to eliminate the regulatory gap that led to its failure to detect the Madoff Ponzi scheme.

Fact: FINRA cannot credibly claim to have missed the Madoff Ponzi scheme because it lacked jurisdiction over Madoff’s investment adviser operations. On the contrary, there was no Madoff investment adviser operation until 2006. . .


Jan 13, 2010 6:32 pm

Bill, how about breaking the implications down a little here.

What are the implications for RRs and what are the implications for RIAs?   Personally, I'm an RR who has considered going RIA but feels the impending "battle", considering the size of my book, would leave me more vulnerable (but richer) as an RIA.   I get the feeling you are advocating separation of oversight of b/d vs. RIA, for whatever reasons, which I confess I have not been following carefully.   Everyone is always trying to hose financial advisors. RRs can make money for folks in the b/d change industry, and fees can be scooped off 12b1s and wrap admin fees, and such.   RIAs might be a great untapped gold mine from the regulatory standpoint (fees, capitulation and aggregation of firms too smale of scale if the regulatory environment changes).   I'm just an ignorant weaner (traditional definition). Life is short. If you are inclined, how about some analysis and synthesis of the data for the masses? There may be other weaners here who might one day retain your services or enhance your journalistic perspective or otherwise reciprocate the favor.
Jan 13, 2010 8:52 pm

Thanks, Bill, for providing a most articulate articulate discussion.

When you do the numbers, it would be in the best interest for the "hundreds of thousands of individuals who toil in the fields" to have an advocate.   We need a trustworthy platform on which to do our business. I guess that looks like RIA.   It would look like "wrap", with a higher payout for the average advisor (realized by cutting out b/d overhead). Consumers would not have to rely on the branding of b/ds for "security". Costs would be reduced, advisors would be better paid to spend more time with their clients.   The small investor - maybe as low as twenty five or fifty thousand assets under management at 1.5% fee, would be better served by more advisors.   It would be easier to start the next generation of financial advisors. There would be more meaningful competition to serve clients.   If enough advisors could see the light, they would hire their own advocate. To pay for that, RIAs are already getting a good payout but b/d advisors are rather constrained  by existing costs.