Industry must draw a line between brokers and financial advisers, TD exec says

Even as services evolve, the two groups' definitions are distinct – and should stay that way, Schweiss says

Dec 12, 2013 @ 4:28 pm

By Trevor Hunnicutt

At a conference in Las Vegas, Skip Schweiss, TD Ameritrade Institutional's managing director of adviser advocacy, told the press Wednesday to stop calling broker-dealer representatives “advisers” in their stories. InvestmentNews asked him why. (The transcript has been edited slightly for clarity and brevity.)

InvestmentNews: You said you want the media to stop calling brokers advisers. Why?

Mr. Schweiss: Because if you're an adviser, you should be registered under the '40 Act, if you're giving personalized investment advice. The brokerage industry has been easing into advice for a long, long time, not under the '40 Act, but as brokers, in contravention of the '40 Act.

Advice is no longer incidental to what they do. If you ask five of your friends who use a broker what they're paying for, they'll tell you advice. They wouldn't tell you, “Oh, to process transactions.” So consumers have become confused due to this evolution by the full-service brokerage industry.

And to your question, the press, I believe, is perpetuating that confusion by referring to brokers and advisers as advisers.

InvestmentNews: What do you say to the broker who continues to define the core of their job as client-centered financial advice?

Mr. Schweiss: I'm not besmirching the broker. I believe that individual is providing great service to their clients. My best friend in the world is a broker. He was my best buddy in high school. He was my college roommate. Thirty years later, he's my best friend. He's been a broker his whole career. He will insist to you, though, I am a broker, not a financial adviser. I'm not a financial planner. I'm not a wealth manager. I'm a broker.

I don't want to take that away from him or that service that he's providing to his clients. I just want the rules to be applied the way they were written. That's not his fault.

InvestmentNews: What irks you the most about the way we have these conversations about fiduciary issues?

Mr. Schweiss: I've seen studies that consumers are turned off by the word [fiduciary], to the degree they even understand it.

Fifteen years ago, we were having a war in our industry over commissions vs. fees and the fee-only movement was just taking form at that time. And the fee-only community at that time had kind of a holier-than-thou attitude that this model is better than the brokerage model.

I firmly believe there's a place for both. Neither one is good or bad. There's a place for both, as long as the consumer understands what they're paying for and what they're getting for that service. Just like any other service or product that you buy, you should know what you're getting and what you're paying for it.

So I think all of the darts that are thrown back and forth is disturbing to me. It's sort of like our political discourse in this country now — if you don't share my point of view that makes you bad.

It's a partisan debate going on. And I think we ought to say there's room for both.

Advisers are not in a position to do IPOs or market-making or brokering transactions. Someone has to do that. That's what brokers do. So there's room for both let's just figure out how to draw the lines so that consumers clearly understand what they're getting.

We should really be debating this also from the vantage point of the consumer, not from what's best for the broker or what's best for the adviser. How about what's best for the consumer?


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