WASHINGTON -- More than 60 advisors from 21 states are fanning out on Capitol Hill on Tuesday to press members of Congress and their staffers for legislation that would enhance oversight of the RIA sector -- and make the case for a uniform fiduciary standard that would apply to broker-dealers serving the retail sector.
The group has lined up more than 80 meetings with legislative offices, with plans to meet directly with at least 25 lawmakers, as part of its first Capitol Hill advocacy day, says FPA president Janet Stanzak.
Among other issues, the FPA seeks legislation that would authorize the SEC to collect user fees from RIAs to increase practice examinations. The FPA has endorsed one such bill, the Investment Adviser Examination Improvement Act, authored by Rep. Maxine Waters (D-Calif.) -- which FPA Chairman Michael Branham calls a "common-sense solution to the specific problem of the SEC not having the funding or resources to go out and examine firms often enough and properly."
"In order to give them the resources they need, we feel like this user-fee funding is the right way to do that," Branham says. He, Stanzak and other FPA representatives briefed reporters Monday in a hotel a block from the Capitol.
INADEQUATE OVERSIGHT
There is little debate that the SEC has been unable to adequately police the RIA sector, a task that became more complicated when, under the Dodd-Frank act, it took on oversight of hedge fund advisors and other professionals that had not previously registered with the agency.
Earlier this year, SEC Chairwoman Mary Jo White told a House committee that the commission had examined just 9% of its advisor registrants last year. White was advocating for a significant funding increase for the SEC, but House appropriators lopped off $300 million from the administration's budget request -- a move that Branham called "disappointing."
Other proposals for addressing the shortfall in advisor exams include outsourcing the oversight responsibilities to a self-regulatory organization such as FINRA.
The FPA argues against that approach, and members are making the case to lawmakers and their staffs that the SEC's principles-based approach to advisor exams is a better fit for their industry than the rules-oriented style of regulation they see in FINRA.
Additionally, FPA advisors were gearing up to argue Tuesday that the SEC is the authority that is the most familiar with their sector, and is therefore in the best position to handle oversight, provided it is adequately funded.
As a practical matter, movement on the user-fee proposal faces long odds. The chairman of the House Financial Services Committee, Texas Republican Jeb Hensarling, has shown little interest in taking up the issue. (Nonetheless, FPA members had arranged a meeting with his office Tuesday.)
The FPA also hopes to persuade members from both parties in the Senate to introduce bipartisan legislation that would address advisor examinations, although the organization's leaders say it is too early to predict when such a bill might materialize.
"It's a matter of keeping the pressure on our financial services leaders," says Karen Nystrom, FPA's director of advocacy. "It would be the perfect storm if we could get it done."
FIDUCIARY EXTENSION?
FPA advocates were also planning to tell lawmakers that the SEC is on the right track as it considers extending fiduciary responsibilities to broker-dealers who are providing personalized investment advice to the retail sector. Acting under authorization -- although not a mandate -- from Dodd-Frank, the SEC has been evaluating whether and how a uniform fiduciary standard could improve investor protections at a time when the brokerage and RIA spaces have been converging.
The SEC's fiduciary work has been muddied by a separate and contentious effort underway at the Department of Labor, where officials are redrafting rules that would apply fiduciary responsibilities to advisors to retirement plans.
The FPA is supportive of that effort, as well, Branham says, though it is waiting to see the revised proposal before weighing in with specific comments.
As part of their Beltway push, FPA leaders met with White House officials on Monday to discuss the planning industry, with a particular focus on how to extend service to middle-income Americans.
"There's an impression that financial planning is only for the wealthy, and that's so not true," Stanzak says.
DISTINCTION FOR PLANNERS
In a more general sense, advisors participating in the FPA's advocacy day were hoping to convince lawmakers that planners are a distinct subset of the financial services industry, and deserve to be classified and regulated accordingly, Branham says. The goal, he adds, is to "increase the recognition and appropriate regulation of financial planners with the aim that one day, we'll be recognized just as physicians and attorneys as a bona fide profession."
Branham argues that the sector is something of an anomaly in Washington terms, in that FPA members are actually quite receptive to additional regulation. According to a yet-to-be-released poll the organization has been conducting, Branham says, 88% of respondents have expressed support for stronger government oversight.
At the same time, he says, policymakers remain confused about how a CFP-designated planner may differ from any other financial advisor or stockbroker -- and that level of confusion puts any type of formal recognition of the field well into the future.
"We haven't had a lot of luck at the federal level, but we continue to be a part of that dialogue," Branham says. "I would say that we're pushing a rather large boulder up a rather steep hill on the federal level."
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