One of them, Robert Arnott, devised a new methodology for indexing investments that is becoming a competitive alternative to the Standard & Poor's 500. Others—Deena Katz, Cheryl Holland and Tim Kochis—are training and developing young talent and figuring out new ways for them to participate in ownership of independent practices. Greg Friedman is creating the technological tools and partnerships the industry desperately needs to become more efficient in an era of compressed margins. Mark Tibergien is taking the management ideas he helped develop at Moss Adams and putting them into practice as the new head of Pershing Advisor Solutions. And Duane Thompson, fresh from shepherding the FPA's victory over the Merrill Lynch rule through the courts, is focused on new regulations to be considered by the Securities and Exchange Commission.
All in all, these Movers and Shakers are an illustrious group. Read on, and get to know whom you'll be watching closely this year.
Managing Director, Financial Planning Association
It was pitted as a David versus Goliath struggle, and when the Financial Planning Association (FPA) won its lawsuit against the Securities and Exchange Commission (SEC) last March, words like "surprise" and "stunning" peppered the media coverage of the victory. But there was at least one person who was not shocked: Duane Thompson, managing diretor of the FPA's Washington office and the one who worked most closely with its lawyers.
Thompson's involvement with the issue began in 1999, when the SEC gave him notice that it was preparing a ruling on certain provisions outlined in the Investment Advisers Act of 1940. The SEC's interpretation of the ensuing rule effectively made an exception for brokerage firms that allowed them to provide financial planning services to the public without being subject to the 1940 Act's fiduciary and disclosure protections. The FPA filed a lawsuit against the SEC in 2004.
Thompson never doubted the FPA's challenge. Even so, last spring he prepared two press releases ahead of the verdict of the U.S. Court of Appeals for the District of Columbia Circuit: one for a victory, the other, defeat. The court ruled in the FPA's favor; then, the SEC decided against an appeal.
As gratifying as the victories were, Thompson says, "This is just one stage of a drawn-out battle in defining financial planning to the public." People will increasingly demand advisor relationships built on trust, he predicts, and the marketplace will respond. Fiduciary responsibility is an issue FPA members hold dear. As a lobbyist, Thompson is used to championing causes, but in this case, his heart is in the same place as his employers'.
When Financial Planning spoke to Thompson, he was awaiting the results of the Rand Corporation study, commissioned by the SEC, on the marketing, sale and delivery of financial products and services to investors. The SEC has said the study will help it consider improvements in regulatory and legislative rules dating to the 1930s.
Thompson intends to keep busy. Reflecting on the court victory, he says, "When you have a clear milestone on an issue like this, it feels great, but it also spurs you to think about what's next."
Founder & Chairman, Research Affiliates
Robert Arnott has always had a passion for out-of-the-box research. After starting his career at the Boston Company, where he was allowed to spend one day a week researching anything he wanted, he quickly learned everything he could about quantitative asset management, a discipline that didn't even have a name at the time. Three decades later, his research has changed the way the industry looks at equity indexes. Capitalization-weighted indexes, such as the Dow Jones Industrial Average and the Standard & Poor's 500, are no longer the only game in town.
"I've always had a concern that cap weighting links the weight of the portfolio to the error in the price," he says. Measuring companies by market weight, he believed, created a tendency to overweight overvalued companies and underweight undervalued companies, leading, eventually, to a drag in performance.
After a dinner meeting with Vanguard founder John Bogle, who started his own business at age 47—the same age Arnott was at the time—Arnott launched Research Affiliates in 2002, a research-based investment firm based in Pasadena, Calif.