$1B cost to harmonize adviser-broker rules would land on clients, Schwab's Bernie Clark says

Melding 600-800 B-D regs and 40-60 adviser regs would be costly, without any real benefit to clients

Nov 12, 2013 @ 10:40 am

By Liz Skinner

Harmonizing regulations that pertain to investment advisers and brokers would add $1 billion in expenses to registered investment advisers without any real benefit to clients, who ultimately would pay that price, Bernie Clark, head of Schwab Advisor Services, said at the Schwab Impact Conference in Washington D.C. on Monday.

The estimate includes one-time costs the firms would incur should the 600 to 800 broker-dealer rules be melded with the 40 to 60 rules that pertain to RIAs, Mr. Clark said in an interview.

He said aligning these regulations is increasingly becoming part of the discussion about whether to require brokers to meet the investment adviser fiduciary standard, which requires advisers to act always in the best interests of the client. Brokers today have to meet only a suitability-of-investments standard.

"Having a single standard of care that puts the client interests first sounds interesting and we would probably support it," Mr. Clark said. "The problem comes when you begin to link other things with that — like rule harmonization."

The Financial Services Institute is encouraging the Securities and Exchange Commission to harmonize broker-dealer and investment adviser rules as part of its consideration of a regulation that would impose a uniform fiduciary standard for retail investment advice.

David Bellaire, FSI executive vice president and general counsel, said that brokers face more stringent rules than investment advisers on a number of topics, including continuing education, qualifying exams and advertising.

“Our belief is that there are clearly areas where the law treats similar financial advisers differently,” Mr. Bellaire said. “Investors shouldn't have to be regulatory experts to understand what protections are afforded to them.”

Mr. Bellaire didn't comment on the Schwab cost estimate, but he asserted that harmonization would not undermine the effort to establish a uniform standard of care.

“The Financial Services Institute is not trying to stop the fiduciary standard,” Mr. Bellaire said. “We have been in support of one since Day One.”

The FSI is a trade group for independent broker-dealers and investment advisers.

The SEC is conducting a cost-benefit analysis of raising investment-advice standards for brokers before deciding whether to proceed with a rule. The financial reform law gave the agency the authority to promulgate the regulation.

The Charles Schwab Corp. is encouraging its 7,000 financial advisers to send letters to their lawmakers in Washington with a warning that any federal proposal melding broker-dealer and investment adviser rules would increase their costs of compliance and operations.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

What's the first thing advisers should do when they get home from a conference?

After attending a financial services conference, advisers can be overwhelmed by options, choices and tools. What's the first thing they should do when they get back to their office?

Latest news & opinion

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients

Legislation requires brokers to act in the best interests of clients.

8 apps advisers love for getting stuff done

Smartphone apps that advisers are using in 2018 to run their business more efficiently.

Galvin's DOL fiduciary rule enforcement triggers industry plea for court decision

Plaintiffs warned the Fifth Circuit that Massachusetts' move against Scottrade signaled that the partially implemented regulation can raise costs for financial firms.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print