We now are facing the threat of a compromised fiduciary standard that will allow brokerage firms to conduct business as usual. We have seen the SEC issue reports that openly talk about accommodating the brokerage industry’s business model.

This is clearly contrary to the SEC’s consumer-protection mandate, but completely consistent with the possibility that if the SEC staffers play ball, they will be rewarded with seven-figure salaries in the industry at some point down the road. Indeed, a former senior SEC staffer recently made the jaw-dropping comment that the brokerage industry has too much influence to ever be held to a true fiduciary standard.

Meanwhile, at congressional hearings, carefully selected witnesses tout the benefits of FINRA oversight of the RIA community. At a recent MarketCounsel conference in Las Vegas, Chris Dodd and Barney Frank told the audience that they had dropped the idea of holding the brokerage world to a fiduciary standard because of vehement resistance from industry lobbyists. Their namesake financial regulatory overhaul opted, instead, to give the SEC authority to impose a fiduciary standard — and we know how that is going.


I think our present situation was captured best when Duane Thompson, then the FPA’s chief lobbyist, now working with fi360, told me without apparent irony that our fiduciary argument was unlikely to succeed in Congress and the SEC. Why’s that? “We have right on our side,” he told me, “but they have most of the money.”

We have a tendency to focus on our own little battles, but I would invite you to consider the bigger picture around the profession’s particular lobbying challenge. We live in an environment (regulatory and congressional) where it is possible for any organization to siphon large profits from the general public — by having the regulators create guidelines that allow what an objective observer might consider sleazy behavior or by lobbying Congress to pass laws that legalize things that are not moral or ethical.

Frank noted in his presentation that he was surprised to discover that much of what Wall Street did to bring down the global financial system in 2008 was perfectly legal — including creating very complicated derivative investments to the specifications of somebody who wanted to bet against them, selling them at a nice profit to unsuspecting customers, and then betting against them for their own account.

In a broader sense, these lobbying victories have given various industries the right to pollute the environment rather than engage in expensive cleanup or retooling activities; complex and onerous regulations on smaller competitors (FINRA, anyone?); specialized tax breaks; the right not to disclose hidden costs, fees and sales incentives; relief from consumer protections; and the right not to be sued (or to force people into an arbitration system that you control).

Lobbying expenses and campaign contributions usually amount to pennies on the dollar collected from the activities regulated into legality. So it makes great business sense, from a bottom-line standpoint, to invest in anti-consumer legislation; and it makes great sense for politicians and regulators to accept the largesse to further their own careers.


I don’t think it takes a lot of imagination to see that these perverse incentives, spread over every profession and industry, can have a visibly perverse impact on our economic system as a whole.

We can see the damage to consumers and consumer-loyal professionals in our own little corner of the landscape. Imagine the same damage routinely spread across the rest of it, with many others fighting the same losing battle with nothing more powerful than “right” (loosely defined as a concern for consumers and the general public and a fair economic system) on their side. Now you begin to realize the size of the challenge we face as a society.

What can we do about this? I’m beginning to think that our profession can’t win its battle against Wall Street and FINRA until and unless we find a way to address the bigger, more global problem in our society.

I would like to see the organizations fighting for a fiduciary standard reach out to groups and organizations that are fighting similar uphill battles everywhere else in our economy, and start cooperating with each other on what we might call the Bigger Fight. We want and need their support, and I’m pretty sure they want and need ours. If all of these groups addressed this Bigger Fight in concert, we might be able to muster the collective resources needed to save our economic system.

Initially, I think this would take the form of informal meetings, helping different groups realize that broader cooperation may be their (our) only chance of success in our respective uphill fights. In those meetings, we would identify the various Davids and Goliaths, and reach out to a broader subset of Davids.

Then the fun begins. Every group has press contacts and grassroots organizations. Each group would outline the fight, showing that all these individual battles are really part of a bigger picture, and describing the dangers of allowing regulations, loopholes and legality to be purchased for pennies on the dollar. Help people understand what’s at stake, and connect the issues that directly impact each group with a lot of other issues that are affecting them in ways they don’t realize.


This might also motivate journalists to publish lists of regulators who have moved on to cushy industry jobs after a career defined by leniency toward those very same industries. We might be able to gather a collective list from all the different government agencies, and I’ll bet it would be eye-opening to those of us who might think it only happens in our corner of the world.

A list like that (and the outrage it would generate) might spur legislation to ban the obvious forms of regulatory capture.

Meanwhile, some organizations may be more politically astute than ours. They can guide the financial planning/RIA profession in how to get the grass roots involved. They can also help motivate constituents from different organizations to weigh in on our issues. Imagine what our lobbying efforts would look like if we had tens of thousands of members of other groups contributing letters of concern to their politicians. And, of course, we would reciprocate.

The overarching goal would be to reform how we elect our representatives in Congress and also in the statehouses. All members of all organizations involved in this group effort would receive regular reports on which industry is contributing money to which elected representatives, along with comments on how that representative is playing ball with lobbyists. Who do the other groups consider to be the dirtiest politicians?

If we all had a comprehensive list like this, we might be inclined to vote differently than we do today. And I think that financial planners/RIAs would be especially valuable to the group, because many of you might be inclined to share this list with your clients — multiplying your effectiveness.

I may be dreaming here, but it’s possible that if all the groups make enough noise about these issues, the voters might demand real campaign finance reform, perhaps even lobbying reform.

My sense is that the U.S. political and economic system may be near an inflection point. We can keep going down a path that might plausibly lead to compromised fiduciary standards — with Wall Street getting a free pass on wearing sheep’s clothing, FINRA crushing Wall Street’s pesky fiduciary competition and another global economic meltdown every seven to 10 years.

Or we can find allies, assembling the coordinated heft to fight back against the interests that are so easily defeating all of us fighting for consumers in isolated, divided engagements. This is a battle we simply cannot win alone. I pray that we can win it together. 

Bob Veres, a Financial Planning columnist in San Diego, is publisher of Inside Information, an information service for financial advisors. Visit financial-planning.com to post comments on his columns or email them to bob@bobveres.com. Follow him on Twitter at @BobVeres.

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