Dodd-Frank, where are you?

Investment advisers await Dodd-Frank impact after three years

Jul 21, 2013 @ 2:29 pm

By Mark Schoeff Jr.

financial reform, dodd-frank
+ Zoom
Financial reformers Frank (l) and Dodd.

Many investment advisers have yet to feel any direct impact from the Dodd-Frank financial reform law three years after it was introduced.

Signed by President Barack Obama on July 21, 2010, the measure was the most sweeping overhaul of financial regulation since the Great Depression. The section of the bill targeting investment advice gave the Securities and Exchange the authority to raise standards for brokers but did not mandate a rule.

In the years since, the SEC produced a study recommending a uniform fiduciary standard for anyone providing retail investment advice. It is now conducting a cost-benefit analysis of potential regulation. But the controversial issue remains on the sidelines as the SEC tackles its nearly 100 mandatory rulemakings.

As of July 15, the deadlines have passed for 279 of 398 required Dodd-Frank rules, according to study by Davis Polk & Wardwell LLP. Regulators have missed the deadlines for 172 of those rules, while 107 have been finalized.

“We're still waiting on so much,” said Barry Glassman, president of Glassman Wealth Services LLC. “I thought we would have far more clarity on what Dodd-Frank means to our business. One of the biggest components of Dodd-Frank [for advisers] is still up in the air.”

Under Dodd-Frank, about 2,400 investment advisers with assets under management between $25 million and $100 million transitioned from SEC registration to state registration.

At the same time, about 1,500 advisers to private funds registered with the SEC. The change in the SEC's oversight mix was designed to enable the agency to better monitor potential systemic risks posed by private equity and hedge funds.

For advisers not making the so-called “switch,” professional life has continued as normal under Dodd-Frank.

“To me, the impact has been almost nothing,” said Brent Perry, president of Piedmont Financial Advisors LLC, who is regulated by the state of Indiana.

In fact, Dodd-Frank has been a non-event for most of Mr. Perry's adviser friends in professional organizations, such as the National Association of Personal Financial Advisors and the Alliance of Cambridge Advisors.

“I don't hear too much complaining about Dodd-Frank, whether they're SEC- or state-registered,” Mr. Perry said.

The situation has been different for Randy Warren, chief investment officer of Warren Financial Service & Associates Inc. In addition to the RIA side of his business, he also runs two hedge funds.

The Dodd-Frank law mandates that such investment pools be subject to annual reviews by major public accounting firms.

“The additional cost of having those funds audited is significant,” Mr. Warren said. “That's literally money out of my pocket.”

Marc Turner, managing director of Renaissance Advisory Group LLC, has seen a positive intangible effect of the financial law.

“The Dodd-Frank Act helped restore responsibility and accountability in our financial system, which gives our clients confidence that there's a system in place that works for them and protects them,” Mr. Turner said.

As investment advisers wait for a SEC decision on whether to advance a fiduciary-duty proposal, they say that the outcome — even if it's a watered-down standard that many fear — won't change the way they interact with clients.

“It's really not going to impact what we do because the way we've done business for nine years is with the highest fiduciary responsibilities in mind,” Mr. Turner said.

Yet how Dodd-Frank will unfold over the next year or more worries some advisers.

“We wonder about the rest of Dodd-Frank,” said Carl Monson, a partner at Strategic Wealth Management Advisors Inc. “I see it as a problem out there. It keeps everything on edge.”


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Carson Group's Schaben: Making sense of millennials

Lazy, entitled, the trophy generation: These are stereotypes most often associated with millennials. But why are these myths and not realities. Carson Group's Aaron Schaben explains.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

TD Ameritrade triples time before it charges fees on popular ETFs

Extending free trading of Vanguard and iShare ETFs to January.

Finra's stats reveal an industry in decline

The broker-dealer regulator reports fewer entities under its watchful eye.

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print