Dale Brown: Preparing for DOL fiduciary sequel

If Dale Brown were a movie producer instead of a lobbyist for independent broker-dealers, he might be preparing a sequel.

“The priority for 2012 is to build on the successes of 2011,” said Mr. Brown, chief executive and president of the Financial Services Institute Inc., which represents 125 firms and 30,000 registered representatives and advisers. “We’ve just had a successful year from an advocacy standpoint.”

One major FSI victory this year, he said, was the Labor Department’s decision in September to withdraw a proposed rule that would have expanded the definition of “fiduciary” for brokers providing advice to retirement plans under the Employee Retirement Security Income Act of 1974.

That doesn’t mean the FSI’s battle on the issue is over, Mr. Brown said. It is widely expected that the DOL will propose the rule again in the coming weeks.

“At this point, we don’t have a clear picture of how they might change what they previously proposed,” Mr. Brown said. “Hopefully, [the DOL] heard concerns from the industry, 100 members of Congress and consumer groups.”

The proposed rule was aimed at protecting investors, but opponents such as Mr. Brown claim that the rule would have made retirement plan advice more expensive and would have undermined small investors’ access to professional retirement planning advice.

Of course, the FSI in 2012 will not be stuck on the exact same issues as 2011, Mr. Brown said. “Tax reform will be part of the discussion in 2012 and beyond,” he said.

Mr. Brown, 50, has more than 20 years of advocacy work for independent broker-dealers under his belt. Before he founded the FSI in 2004, he had management experience with the Financial Planning Association and its predecessor groups, working on broker-dealer and government relations programs.

He showed his deft hand with broker-dealers in October by announcing an increase in fees for FSI members in 2012. The group’s annual fees, which currently range from $1,000 to $20,000 depending on the revenue of the member firm, will climb to between $1,500 and $100,000.

In 2014, the dues will increase again to a range of $2,000 to $175,000.

FSI has 11 full-time staff and an annual budget of $4.2 million.

Despite the sharp increase, the fee hike was met with a minimum amount of grumbling, and no members resigned. In fact, a couple of firms have joined the organization, Mr. Brown said.

Another area on which he will focus is “some significant areas of implementation of the Dodd-Frank Act,” such as the SEC’s uniform fiduciary standard of care rule making and support for a self-regulatory organization for registered investment advisers.

“Before legislation was introduced, we consistently have said there was a serious regulatory gap or disparity between overseeing broker-dealer activity and examining RIAs,” Mr. Brown said. “Clients and the industry will benefit from a uniform fiduciary standard of care. First, it has to be workable and affordable across all business models, and second, there needs to be enhanced exams by an SRO for advisers.”

And a perennial challenge for independent broker-dealers and their affiliated reps is the states’ questioning whether independent brokers qualify for the tax status of an independent contractor.

The FSI will continue to be on guard for such efforts by the states, Mr. Brown said. “States have serious budget problems, and when they’re looking for ways to fix budgets, they say, “Hey, let’s close … loopholes.’”

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