In his 18 years leading the Investment Adviser Association, David Tittsworth saw the proliferation of adviser regulation and played a key role in stopping a potential new development – the establishment of a self-regulatory organization for advisers.
Mr. Tittsworth will leave the IAA on Feb. 6 after stepping down as president and chief executive in November. He has stayed on board since then as a consultant to help in the transition to the new head of the organization, Karen Barr.
Shortly after Mr. Tittsworth arrived at IAA in October 1996 from Capitol Hill, President Bill Clinton signed the National Securities Markets Improvement Act. Among other things, the measure moved investment advisers with less than $25 million in assets under management from Securities and Exchange Commission oversight to state regulation, reducing the number of SEC-registered advisers from 22,000 to about 7,000.
“We didn't know it at the time, but that was the beginning of modern investment-adviser regulation,” Mr. Tittsworth said in an interview.
The law, known as NSMIA, ushered in an era of increasing adviser oversight. In 1996, advisers only had to have one policy in writing, which outlined the steps they took to avoid insider trading. Today, they have to file an ADV and reams of other forms.
“There's no question that regulations have exploded during the 18 years I've been doing this job,” Mr. Tittsworth said. “It's hard just keeping up with the compliance and regulatory burden.”
The compliance landscape looked as if it were about to change in 2012 – for the worse, many advisers believed – with the advent of legislation that would have established one or more self-regulatory organizations for the sector.
The bill, written by Rep. Spencer Bachus, R-Ala., then chairman of the House Financial Services Committee, had the strong backing of the Financial Industry Regulatory Authority Inc. Finra, the industry-funded broker-dealer regulator, was seeking to expand its jurisdiction to investment advisers, a prospect that made advisers shiver.
Mr. Tittsworth was the only witness at a June 6, 2012, hearing who opposed the bill, saying that it would raise regulatory costs for small investment advisory firms.
He took the majority of the questions from lawmakers during a session that lasted more than three hours. Over the course of the hearing, Republican lawmakers started expressing doubts about the legislation. Later that year, the bill died without a vote in the committee.
“He was able to parry [Mr. Bachus] and do a great job of objecting to an SRO and supporting the current regulation of the SEC,” said Duane Thompson, a senior policy adviser for Fi360, a fiduciary-duty consulting firm.
The day after the hearing, the IAA sponsored a lobbying day on Capitol Hill during which its members plied lawmakers with the drawbacks of an SRO. Other groups, including the Financial Planning Association, sponsored similar events.
“That was the biggest grass-roots advocacy effort that I've ever seen from the investment-advisory profession,” Mr. Tittsworth said. “That makes a difference. We can take some of the credit but not all of the credit. It just wasn't us. We had allies.”
Among them was the Financial Planning Coalition, composed of the FPA, the National Association of Personal Financial Advisors and the Certified Financial Planner Board of Standards Inc. The FPC sponsored a study by the Boston Consulting Groupthat asserted that an SRO would be much more costly than increasing SEC funding for exams.
Marilyn Mohrman-Gillis, managing director of public policy and communications for the CFP Board, said that Mr. Tittsworth and IAA were instrumental in the coalition that formed against the SRO bill.
“The coalition has been very strong because it has straddled the industry side as well as the consumer side,” Ms. Mohrman-Gillis said. “I feel privileged to have worked closely with David on critical policy issues.”
The IAA didn't just declare victory after the demise of the SRO bill. Along with other investment-advice groups, it advocated for legislation that would allow the SEC to charge advisers user feesto boost the number of annual adviser examinations, which currently cover only about 10% of the approximately 11,500 registered advisers.
“They had something more to say than 'no,'” said Barbara Roper, director of investor protection at the Consumer Federation of America. “They were supportive of an alternative approach to solve the problem. That's a tribute to David and others that worked with him on that approach.”
Unlike other parts of the financial services industry, the investment advice profession doesn't have a dominant, well-funded lobbyist. That means that IAA has to work with many other groups to influence legislators and regulators.
“That has required a lot of diplomatic acumen in working with a coalition,” Mr. Thompson said. “When you look back over the last 20 years, David Tittsworth and the IAA have faced tremendous odds and have held their own.”
It's not surprising that Mr. Tittsworth excelled in such a role. Colleagues describe him as affable and humorous.
“David is the real deal – a strong and effective leader who leaves a legacy of significant accomplishments for the investment adviser industry, and a genuinely warm, caring and thoughtful human being,” Ms. Mohrman-Gillis said.
The former counsel to longtime Rep. John Dingell, D-Mich., when the lawmaker was chairman and ranking member of the House Energy and Commerce Committee, Mr. Tittsworth, 61, is not sure what he will do next.
He was diagnosed with multiple myeloma in February 2013 and underwent a stem-cell transplant that summer. The cancer is now in the equivalent of remission.
“I want to remain healthy,” Mr. Tittsworth said. “A key part of the decision [to leave IAA] is to try to have a little more balanced life.”
The cancer has changed his perspective.
“It's hopefully made me more empathetic,” he said. “It's one of the positive things about being a cancer survivor. Unfortunately, it's a very big club.”
Mr. Tittsworth has made comebacks his hallmark. He also survived a severe bicycle accident in August 2012 that put him in an intensive care unit for nine days. It's likely he'll resurface in the investment advice advocacy space as well.
“My guess is that I'll emerge in some capacity in two to three months,” Mr. Tittsworth said.