8 issues covered at the 2022 FSI OneVoice conference

8 issues independent wealth managers are watching closely in 2022

February 11, 2022 3:17 PM

FSI OneVoice Conference panel — From left to right, Financial Services Institute CEO Dale Brown, Raymond James Financial Services Independent Contractor Division President Jodi Perry, Stifel Independent Advisors CEO Alex David and Lincoln Investment CEO Ed Forst spoke in a panel at the OneVoice conference last week in Dallas.

Independent wealth managers and financial advisors have many important political issues and business challenges to keep tabs on in 2022.

That was the key takeaway at last week’s annual OneVoice conference held by the Financial Services Institute, a trade and advocacy group representing 90 independent wealth managers and more than 30,000 financial advisors. During the conference, FSI launched a new program aimed at increasing opportunities for historically excluded groups in wealth management. The organization also raised alarms about the current regulatory uncertainty in the industry and warned against overreach by SEC Chair Gary Gensler’s team in how it enforces the rules.

For a roundup of some of the most interesting insights and views from eight FSI board members and executives during last week’s event, scroll down our slideshow.

Ed Forst

In addition to the public health implications, the pandemic posed challenges to independent wealth managers and their clients, according to Ed Forst, CEO of Fort Washington, Pennsylvania-based Lincoln Investment and the chair of FSI’s board.

“A lot of businesses were disrupted pretty significantly,” Forst said. “We found a way in our business to continue to serve our clients and it's Main Street America, middle-class America. Those folks have been thrown into pretty much economic chaos through COVID, and we helped them through it. And the advisors found a way to be more effective, not equally effective. They were more effective with their clients.”

Robin Traxler

FSI added a new priority this year to its advocacy agenda — the debate surrounding FINRA arbitration reform efforts involving expungement of client complaints from advisors’ records and unpaid awards amounting to tens of millions of dollars a year, according to deputy general counsel Robin Traxler. FSI opposes the idea of imposing a fee on firms or brokers to create a pool ensuring that the clients receive their awards, she said.

“We believe that people who are not involved and responsible for harm in a dispute should be able to expunge their records if they were named in the matter,” Traxler said. “We also believe that unpaid arbitration award pools that have been proposed by some lawmakers, that they were counterintuitive to protect the investors. And so we would work against any effort to create an unpaid arbitration award pool, but instead urge regulators to do more things to keep those bad actors out of all areas of the financial industry as a more effective way to protect investors.”

Alex David

Asked where he sees new competition emerging for independent wealth managers, Stifel Independent Advisors CEO Alex David mentioned the private equity investors helping to drive record M&A volume in the industry for several years in a row.

“They're engaging our advisors,” David said. “And the conversations that they're leading are fostering these significant, like nose-bleed valuations that I really believe could change the way that the world looks in terms of the independent advisor in the next three, four, five years.”

Jodi Perry

The private equity capital will be “incredibly disruptive going forward,” Raymond James Financial Services Independent Contractor Division President Jodi Perry said in agreement with David. The influx of capital for RIAs and the less-intensive regulatory scrutiny as compared to the dually registered brokerages is prompting teams to change the traditional approach among breakaway teams, Perry said.

“We see a lot of advisors now who aren't taking what we used to think was a natural evolution, where they were an employee, and then they decided to be an independent contractor and then a few of them decided that they actually wanted to go out and start their own RIA and run that business,” she said. “We have more advisors now considering going the RIA route. And then we have breakaway advisors who are sort of skipping what's now become that middle step, and they're going straight out from the employee model straight out to the RIA side."

Forest Harper

The CEO of a corporate internship and professional development organization for underrepresented young people called Inroads, Forest Harper, connected its new strategic partnership with FSI to efforts aimed at reducing the racial wealth gap in the U.S. The organization views the internship and training — which has seen 38% of its 30,000 participants over the past 50 years go on to become entrepreneurs — as tied to closing the gap, he said.

“We began to think about, how do we have corporate America and businesses do better and close the racial wealth gap in America?” Harper said. “Today, I'm just so excited. I can't sit still to be sitting here with those who have shaped, over the years, wealth for your clients. And so what better way to ensure that those who are going to come behind us in the future, whether it's the talented executive or independent owner of business, to manage their money and get advice early on in their careers so they help close that racial wealth gap in America?”

Dale Brown

FSI will keep speaking with Gensler’s team about one of its main advocacy issues — what the wealth managers call “regulation or rulemaking by enforcement,” — throughout the year, CEO Dale Brown said.

“As we have on every issue for 18 years, we are going to be seeking in every way to engage constructively,” Brown said. “We have over the past two years criticized the SEC sharply when we feel like they've gotten out of bounds. I think sharp criticism is part of constructive engagement. It's not ad hominem attacks. It's, ‘We bring our facts, we seek to bring solutions to the problem.’ And as we engage with the SEC on this issue in 2022, we're going to continue the same constructive engagement approach. We've had conversations with the chairman's team, and we'll continue to do so. It's a high priority for our members, and we're constantly seeking to partner with our members to make sure that we, as their advocates, have access to good intelligence on what's actually happening on the ground so that when we do engage the SEC, we're bringing facts and we're able to make our case that, absolutely you must use your enforcement powers. That's your responsibility, to protect investors. And you've got to be very, very careful not to make new rules in that process.”

David Bellaire

The trade group and its allies among conservative state lawmakers and businesses represented by the American Legislative Exchange Council are working together under FSI’s opposition to legislation that could alter the rules around independent contractors. Firms such as Uber and Lyft often receive the most attention for employing such workers, but independent wealth managers’ advisors are 1099 contractors as well. FSI will seek to guard the independent firms’ business model against any potential changes, such as the Protecting the Right to Organize (PRO) Act, which passed the House of Representatives last March, general counsel David Bellaire said.

“On the independent contractors issue, there's still a lot of work to be done,” he said. “And we're not resting on our laurels, but we did have a very good and successful 2021.”

Chris Perry

At the request of FSI, corporate services and technology company Broadridge Financial Solutions conducted a study tracking the demographics of independent advisors and their views of the most important industry issues, Broadridge President Chris Perry said. Only 18% of the advisors are women, 3.5% are Asian American, 2% are Hispanic and 2% are Black, according to the survey of about 500 registered representatives and employees. Wealth managers will need to engage more historically excluded groups as clients and advisors to increase access to investment and build their businesses, according to Perry.

The low percentage of women “jumps out because our working society is over 50% female,” Perry said. “Just to get to 25%, we need to add about 2,500 female advisors.”