FSI legislative discussion

Kevin S. Whiteford was the only agent/advisor asked to accompany Cambridge Investment Research, Inc’s team to discuss important pending legislature in Washington D.C. Kevin is a member of the Financial Services Institute (FSI), and discussed the following topics with United States Congress Members.

 

 

Promoting Retirement Security

The Financial Services Institute (FSI)1 supports reasonable efforts to improve the ability of Main Street Americans to save for a financially secure retirement. While the state and federal governments can be good partners in this effort, we believe that retirement solutions should be provided by the private sector to ensure that Americans have access to personalized investment advice.

1 The Financial Services Institute (FSI) is the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for nearly 40,000 independent financial advisors, and more than 100 independent financial services firms who represent upwards of 160,000 affiliated financial advisors. For more information, visit www.financialservices.org.

2 The Insured Retirement Institute, The State of Retirement Security in America Today – 2019 Boomer Expectations for Retirement Study available at: https://www.myirionline.org/docs/default-source/default-document-library/iri_babyboomers_whitepaper_2019_final.pdf?sfvrsn=0; Claude Montmarquette, Nathalie Viennot-Briot, Centre for Interuniversity Research and Analysis on Organizations (CIRANO), The Gamma Factor and the Value of Advice of a Financial Advisor, available at https://www.cirano.qc.ca/files/publications/2016s-35.pdf

All investors should have access to competent and affordable financial advice, products and services delivered by a growing network of independent financial advisors and independent financial services firms.

Having a relationship with a trusted financial advisor is crucial to saving for retirement. Research shows that investors who work with a financial advisor are better prepared for their retirement, better understand the costs that may arise in retirement and how to save for them, and feel more confident in their ability to be successful in retirement.2 In order to ensure that Main Street investors have access to critical financial advice, products and services, FSI supports retirement security legislation that includes the following:

Expand workplace retirement savings opportunities

Small Businesses across the country struggle to absorb the cost of offering retirement savings options to employees. Legislation can fix this critical gap in coverage by:

  • Providing tax incentives to enable more small employers to help their employees save for retirement; and
  • Enabling more small employers to use multiple employer plans.

 

Remove the age cap on IRA contributions

As Americans are living and working longer than ever before, allowing IRA contributions for as long as someone is working will ensure they can continue to save for retirement.

Expand access to lifetime income products in retirement plans

Increasing access to lifetime income products in retirement plans will ensure that Americans have the tools they need to turn their savings into protected income streams.

Allow the tax deductibility of advisory fees

Seeking help navigating the complexities of retirement savings should not result in tax challenges for Americans. Permitting savers to deduct investment advisory fees will immediately impact their bottom line and allow their retirement savings to grow.

FSI is committed to constructive engagement in the legislative process. We are ready to serve as a resource in your efforts to help Main Street Americans save for their retirement. Should you have any questions, please contact our Director of Legislative Affairs, Hanna Laver, at (202) 499-7224.


End Regulation by Enforcement

Introduction

The Financial Services Institute (FSI)1 and its members are concerned that a recent SEC enforcement initiative constitutes regulation by enforcement. This practice harms firms by failing to provide the necessary certainty for them to operate their business -independent financial advisors and firms have a reasonable expectation the SEC will disclose the rules of the road before engaging in enforcement. Further, regulation by enforcement raises costs for firms, which are then passed on to Main Street investors.

1 The Financial Services Institute (FSI) is the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for nearly 40,000 independent financial advisors, and more than 100 independent financial services firms who represent upwards of 160,000 affiliated financial advisors. For more information, visit www.financialservices.org.

Share Class Selection Disclosure Initiative

The Share Class Selection Disclosure Initiative was announced in February 2018, firms were given four months to voluntarily self-report instances where they may have failed to adequately disclose certain fees that investors pay and recommendations of higher cost share classes when lower cost shares of the same investments were available. In exchange, the SEC’s Enforcement Division agreed to recommend “lighter” settlements and lower fines, while warning that firms who did not self-report would face steeper penalties

However, Division staff could not cite a clear rule or regulation that had been violated instead citing previous settlements and published guidance as the basis for the violations. Further, firms report that the issue of inadequate share class disclosures was never raised during their regular exam cycles. If this was an issue of concern to the SEC, why was it not raised earlier so that firms had an opportunity to fix it sooner?

To date, the Initiative has collected $125 million from almost 80 investment advisers. In addition, firms that did not report during the Initiative are receiving document requests from the SEC alleging that they have engaged in misconduct but failed to take advantage of the Initiative. The Division is reportedly now moving to a second phase in the initiative, expanding its scope to other areas not identified in the original Initiative.

This practice of imposing regulatory requirements through the enforcement process runs counter to the statements of Chairman Clayton and Commissioner Peirce:

  • “The Commission’s longstanding position is that all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.” Chairman Jay Clayton’s “Statement Regarding SEC Staff Views,” made on September 13, 2018.
  • “I have grown increasingly concerned that this necessary guidance—due to a lack of transparency and accountability—may have turned into a body of secret law. This secret law, as a practical matter, binds market participants like law does but is immune from judicial—and even Commission—review.” Commissioner Hester Peirce’s Remarks at SEC Speaks made on April 8, 2019.

 

Regulation by enforcement deprives industry of the opportunity for notice and comment required by law under the Administrative Procedure Act. Without proper notice of the “rules of the road” financial advisors and their firms cannot serve their clients, depriving Main Street investors of access to critical investment advice, products and services. For more information, visit https://financialservices.org/regs-without-rules/