After eight years serving on FSI’s Board, I have become very familiar with the extraordinary level of energy and focus FSI’s staff and Board members bring to the mission of protecting independent advisors and broker-dealers on both the regulatory and legislative fronts. This year, though, I have been privileged to serve as Board Chair during an especially crucial period of growth for FSI, as we significantly expanded the scope of our advocacy activities among state lawmakers and regulatory agencies, while continuing to engage on the crucial issues that matter to our members at the national level.
Rulemaking and the legislative process at the state level tend to work very differently than the equivalent processes at the national level. Congress and our national regulatory agencies typically move at a very slow pace that provides opportunities for various constituencies to submit feedback along the way. However, because of the lack of progress in Washington, states have been trying to fill the void, thereby making engagement with the states essential to our members’ success.
At the state level, new rules and laws that can have profound impacts on advisors and their businesses can emerge and move through the approval process more rapidly. Developing an effective state advocacy presence in order to insure the perspective of independent advisors is understood at the state level, then, requires continuous monitoring of developments in states across the country; sound and strategic deployment of advocacy resources; and — more than anything — an enormous amount of plain old hard work.
Looking back on the past year, I am happy to report that your team of advocates at FSI has succeeded on every count.
In the past year alone, FSI staff and Board members have conducted in-person meetings with state legislators and regulators in 21 separate states. In most of these meetings, we were able to include local independent financial advisors and representatives from nearby independent financial firms, including C-level officers as well as executives from compliance, risk management, legal and due diligence, among others.
In each meeting, FSI’s staff, Board members and advisor and firm members have provided state officials with valuable context to help them understand how the independent advisory model functions, and how our due diligence and supervisory practices work to protect Main Street investors.
FSI’s creation of a new standing Due Diligence Council this year has helped us further illustrate our industry’s commitment to careful product selection and supervision to state officials. (And since ProEquities’ own Director of Due Diligence, Jordan Flebotte, served as the inaugural Chair of that council, I know firsthand how hard the council’s members have worked to share due diligence best practices with all of FSI’s member firms.)
Over the course of the past year, we have also been highly proactive in directing resources toward state-level issues that both our members and state officials care deeply about, including combating elder financial abuse and strengthening financial literacy in communities around the country.
This wide-ranging yet strategically focused effort to build relationships with state lawmakers and regulators has already produced significant results: FSI was able to successfully advocate against proposals to create state-sponsored retirement plans for private sector employees — which could have potentially undermined strong existing markets for retirement plans — in 14 states this year. In addition, FSI also worked to head off new taxes on financial advice, defend advisors’ independent contractor status and protect our members’ use of social media.
While our efforts to expand our presence at the state level have been highly effective, FSI has not in any way reduced its focus on national issues. We engaged quickly and decisively with FINRA regarding its sweeping proposal to create a vast and complex new system — the Comprehensive Automated Risk Data System, or CARDS — to monitor customer and transaction data across the financial services industry.
We submitted a comment letter to FINRA in March pointing out our significant data security and privacy concerns with the new system, and — thanks to our consistent outreach and strong dialogue with the agency — played a substantial role in its eventual decision to exclude personally identifiable customer information from the data it will collect, as well as to remove other controversial elements of the proposal that could have created serious new operational burdens for our members. Going forward, we will continue to be fully engaged on this proposal, as we demonstrated with the formation of our FSI CARDS Task Force in October.
We were also pleased to see that our consistent opposition to the Department of Labor’s (DOL) proposal to redefine the term “fiduciary” — thereby potentially prohibiting commissions on financial advice to IRA account holders and pricing millions of Main Street investors out of professional financial guidance — resulted in further delays to the new and revised version of the proposal.
Although my year as Chair is drawing to an end, I come away from this experience more hopeful and excited about the future of our industry than ever before. In the year ahead, I plan to remain as active as ever in driving home one of FSI’s fundamental messages to regulators and the incoming Congress alike: That over-regulation — or regulation for its own sake — is not the answer for the challenges American investors face today. Only by working together to establish a smarter and more effective regulatory environment can we continue to encourage the entrepreneurial spirit our country thrives on, while providing Main Street investors the financial guidance and solutions they need.
I and the entire FSI team look forward to working with each of you to make further progress toward these goals in 2015.