Fifteen years ago, the independent financial services industry needed a voice. At the time, larger Fifteen years ago, the independent financial services industry needed a voice. At the time, larger regional firms had advocates in the halls of Congress, with regulators and in state houses around the country. So too did insurance agents and Certified Financial Planners.
And while these advocates occasionally touched on some of the issues that were important to independent broker-dealers, independent advisors and Main Street investors, there was no single organization that promoted the specific concerns of our community.
“At the time, we couldn’t rely on other advocacy groups to look out for our concerns,” recalls Brian Murphy, Executive Director at Lion Street, who served as FSI’s Board Chair in 2007. “Some of the matters they talked about may have indirectly benefited us, but no one was ensuring that legislators and regulators understood the unique benefits that the independent broker-dealer model delivered to consumers.”
Because of this lack of understanding, Murphy says regulators often foisted rules upon the independent channel that did nothing to protect investors but increased costs for firms and advisors – and which, in turn, served to limit investors’ access to advice.
This helps to explain why, in 2003, our President and CEO, Dale Brown, traveled to Dallas to ask 1st Global Founder Tony Batman whether he’d be interested in helping to create a new advocacy voice for independent firms like his.
Batman agreed almost immediately, underscoring the large void we hoped to fill, and then served as our Founding Chair for the next two years. The rest, as they say, is history.
At first, we spent much of our time raising awareness about our role and about the firms and advisors we represented. In those early days, when we met with lawmakers and regulators, there was widespread confusion about the business model of independent broker-dealers, how independent advisors worked with them and how these advisors served their clients.
Many conflated our industry with the wirehouse world. A few years later, when the excesses of Wall Street wreaked havoc with the financial system, this misunderstanding made our task more complex because our members were considered by some to be guilty by association – even though there was little association at all.
Today, the dynamic is much different. We are pleased to say that our consistent efforts on this front have created not only a far greater understanding of the independent business model among regulators and lawmakers, but that most of these leaders now realize that independent advisors are not the root of the problems facing today’s investors. In fact, it’s becoming clearer to them that independent advisors represent the solution to many of these challenges.
“Independent advisors have a profound respect for their clients,” says Joe Russo, the Chairman and CEO of Advantage Financial Group, who became the first financial advisor to serve as our Board Chair in 2012.
“They understand that a client’s trust isn’t simply earned once – it has to be earned every day. It’s very simple: If we lose our clients’ trust, we’re out of business. Regulators didn’t always recognize this dynamic,” says Russo. “Many of them, thanks to FSI, now do.”
Moreover, some of the very same audiences we worked hard to educate in our early days now look to us to help them better understand the biggest questions facing the industry.
“Today, few, if any, impactful issues move forward without at least some level of FSI engagement,” Brown says. “In many instances, in fact, regulators, lawmakers and members of the media proactively solicit our input.”
That’s not by accident. Brown recalls that this outcome was one of our core goals from the beginning, as we developed a deliberate and strategic plan to emphasize constructive engagement with regulators and legislators – not confrontation.
“We could have been like food critics, who, in many instances, have an adversarial relationship with those they work with, or we could have taken a more conciliatory approach,” Murphy says. “We chose the latter, because we knew it would give us the best opportunity to both influence the debate and evolve into an industry thought leader.”
To ensure that firms and advisors enjoy the best possible regulatory environment and that Main Street investors continue to have access to advice, we remain steadfast in our commitment to maintaining this pattern of engagement. That is both a challenge and an opportunity, given that there will always be a rotating cast of lawmakers entering and leaving Congress, which can upend the makeup of committees that are often the first to consider issues that impact our members.
This fact was highlighted by the results of the November 2018 midterms – and should not be forgotten with a presidential election on the horizon, raising the possibility of further shakeups across the political landscape.
“The faces in Washington may change, but our mission does not, so there is no let up,” Brown says. “We have to constantly build new relationships, reinforce existing ones and help people understand how we are unique in the marketplace. That’s how we get results.”
Brown also emphasizes the quantitative measures that demonstrate FSI’s impressive growth over the past 15 years.
For example, before shifting our headquarters from Atlanta to Washington, D.C., in 2009 to be closer to the nation’s legislative and regulatory epicenter, we had approximately $3.5 million in revenue and approximately 15,000 members. Last year, we saw revenue of over $10 million for the first time and enjoyed the support of 33,000 members.
As our resources have grown, so too has our ability, with the encouragement of the Board, to invest heavily in recruiting and retaining a powerful roster of talented, committed and results-oriented professionals. Those added resources have also empowered us to take on big challenges, which is underscored most profoundly by our decision to join a group of other business and industry organizations in filing a successful lawsuit against the Department of Labor last year that resulted in the department’s onerous and unworkable fiduciary rule being overturned.
No one knows for sure what the future holds, but Brown says FSI will always be looking for ways to leverage the seat at the table we have earned over the last 15 years to deliver value to our members, and to succeed in our mission of expanding access to financial advice for every American who wants it.