Washington INsider

Washington INsiderblog

Mark Schoeff Jr. looks at what's really happening on Capitol Hill - and the upshot for advisers.

Mr. Adviser goes to Washington

Advisers' already slow progress in Congress just got slower as partisan tensions rise

Jun 13, 2014 @ 12:24 pm

By Mark Schoeff Jr.

More than two dozen members of the Investment Adviser Association chose an auspicious time to roam Capitol Hill on Thursday to meet with lawmakers and their staffs during the organization's Lobbying Day.

The House was buzzing with intrigue about the downfall of Majority Leader Eric Cantor, R-Va., in a primary election earlier in the week — the first time anyone in a position that high had lost in a primary.

Mr. Cantor's demise will increase partisan tension in Washington and further ensure that not much gets done in in the capital. For investment advisers, whose issues are usually ignored by lawmakers who don't understand their industry, it makes pushing their agenda even more difficult.

But Bernie Clark, executive vice president of advisor services at Charles Schwab & Co. Inc., hasn't lost faith. He enthusiastically participated in IAA's Lobbying Day, educating legislators and their aides about the characteristics of the investment advisory business, such as advisers being required to act in the best interest of their clients and operating for the most part as small businesses.

“I'd like to see Congress begin to appreciate that in ways that will help finance committees and others work on future legislation,” Mr. Clark said between meetings.

Advisers are making inroads slowly. Mr. Clark pointed to the example of adviser opposition helping kill a 2012 bill written by then-House Financial Services Committee Chairman Spencer Bachus, R-Ala., that would have established one or more self-regulatory organizations to oversee advisers. Advisers were worried that the bill would have ushered in the Financial Industry Regulatory Authority Inc., the broker-dealer SRO, as the adviser regulator.

Mr. Bachus never re-introduced his legislation. Instead, what's on the table now is a bill that would allow the Securities and Exchange Commission to charge advisers user fees for exams and an idea from SEC Commissioner Daniel Gallagher for the agency to establish third-party examinations for advisers.

“I think that's progress,” Mr. Clark said. “We're [moving] toward solutions. We're going to keep coming back and telling [our] story.”

One way that advisers cut through the cacophony on Capitol Hill is by making a unique proposition to lawmakers. They want their exam frequency to increase, according to Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional.

“It's very unusual for us to come in and ask for more regulation for the sake of investors — and we're willing to pay for it,” said Mr. Schweiss, who also participated in the IAA Lobbying Day. “That really gets their attention. They don't have that throughout the day from other meetings they're in.”

Sometimes, though, visits from financial advisers can have a practical effect on policy, according to Dean Harman, owner of Harman Wealth Management Inc.

He participated in the Financial Services Institute's advocacy day in May. More than 100 FSI members expressed their reservations to lawmakers about the pending Labor Department fiduciary-duty rule. Mr. Harman said FSI should take partial credit for a rule delay that was announced a week later.

“Some of that was the result of meetings we had with members of Congress, and the things they learned,” Mr. Harman said.

Advisers should come to Washington more often, Mr. Harman said. Sitting down with a lawmaker can connect them directly to national policy.

“That's the most important aspect of this – is making it real,” Mr. Harman said.

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