If He Had a Hammer (Advisors Would be Ducking)

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I’m running for king of America.Yes, you read that right — king, not president, which is an office with powers and prerogatives far too limited for my taste. I’d prefer something more along the lines of the hereditary monarchies that flourished in Europe during the 14th through 17th centuries.

Here’s my campaign platform as it relates to the financial services industry.

I will require FINRA to change its name back to the National Association of Securities Dealers. The earlier change was a deliberate attempt to position this self-regulator and lobbyist as an all-encompassing regulatory body. It definitely confuses the public.

I will also require the SEC to justify all of its initiatives based on how they benefit and protect consumers, regardless of how they might interfere with the financial services industry’s business models.

I will decree that the SEC may only intrude with its oversight to the extent of the conflict of interest involved. If an advisor gives up commissions, he or she will no longer be seen as a “rogue broker,” but as a professional who has chosen to renounce financial temptations to churn accounts or recommend unsuitable investments.

And I will insist that the CFP Board spend its time and energy maintaining the highest educational standards for the CFP mark, and get out of the enforcement business — which it doesn’t seem to be very good at.

With my divine mandate, I will encourage the creation of a Professional Association, which will set membership requirements based on educational credentials, professional competency and fiduciary standards as determined by the profession itself. This will help the public identify sales agents masquerading as professionals. The criteria for distinguishing the two will become oh so simple: Self-proclaimed advisors will either be members of the PA, or they will not.


Furthermore, I will insist that all financial cable televison channels disclose their conflicts of interest. At present, they benefit from convincing an unwary public that the latest market data and the opinions of their commentators are actually relevant to a prudent, long-term investor.

I will permit Congress to remain in session. But members will be required to disclose, for each piece of legislation that they propose or support, whether and precisely how it benefits any organization from which they’ve received campaign contributions.

And I promise to eradicate the double standard for legal enforcement. In other words, I’m going to require the SEC to hold the executives of big Wall Street brokerage operations legally accountable for their firms’ misdeeds, just as it does with smaller broker-dealers and advisory firms.

If a brokerage firm advertises that it offers personalized financial advice or financial planning, or that it helps people achieve their goals and dreams, then all of its retail brokers will be required immediately to register with the SEC as RIAs.

Brokerage firms will also be required to decide whether they are in the business of giving investment advice to customers or using their research to invest in their own account. Doing both creates too much temptation to take advantage of opportunities that they should be passing on to clients.

When I am king, every sales contest in the financial services world will be publicized so consumers can keep track of the winners, along with the bonuses and awards that they receive.

Financial services lobbyists will be required to explain why it’s poor public policy to require brokers to treat their customers as they would their own mothers. And firms will have to explain in writing why their lobbying position benefits consumers.

If brokerage firms and broker-dealers respond to proposals for new regulation by threatening to abandon middle-class consumers, then they will be barred from serving those customers for a period of 10 years, if the new regulations are passed.


Wall Street loves rankings, so I am looking forward to requiring the SEC to publish monthly rankings of brokerage firms and independent BDs, based on the amount of the settlements and fines they have paid.

The listings will include penalties that were paid year-to-date, over the past five years and since the firm was founded. So as not to leave anyone out, all FINRA arbitration awards and settlements will be made public.

Before I give FINRA any more oversight responsibilities, I’m going to require that it carry out on-site inspections of all individual dually registered RIA offices at least once every four years, rather than the current rate of once every several centuries.

As my royal prerogative, I will bar SEC staff members from accepting jobs in the industry they regulate for 10 years after they leave the agency. This will eliminate the temptation to play ball with the industry in the hopes of receiving a lucrative job.

Does that seem harsh? No worries. I will expressly permit former SEC staffers to join independent financial planning firms, where they may accept positions under the pay structure of associate planners.

But why fiddle around? As my coup de grâce, I will mandate a restructuring of the entire financial industry. This will force large banks and brokerages to operate like regulated public utilities, rather than free-wheeling investment shops that pocket their profits and put the government on the hook for their losses.

Our economy’s capital should be allocated to where it is needed, yet it is now subject to tolls and sly self-dealing every time money changes hands. Large financial institutions rake in an astounding 30% to 40% of the country’s total profits, according to a study by The Atlantic of Bureau of Economic Analysis data.

The U.S. financial services industry accounted for about 4.9% of total GDP in 1980, according to a 2012 paper by two Harvard Business School professors. That grew to 8.3% by 2006 and remained over 7% even after the bankruptcies of the Great Recession. The U.S. is the only developed country where the financial sector has experienced such growth, the authors noted.

As divine ruler, then, my priority must be to wrest lending and IPOs away from Wall Street and see that they are handled far more efficiently via auctions and agreements conducted over the Internet.

I humbly beseech you to compare the world we live in with the world as it could be. Acknowledge, if you will, that my proposals include many positive and beneficial changes. If you do, you may recognize the sheer magnitude of the difference. Elect me your royal highness and we will restore hope that this can be a better world.

While you may not agree with everything I suggest, I hope you notice that my platform doesn’t include beheading dissenters. 

Bob Veres, a Financial Planning columnist in San Diego, is publisher of Inside Information, an information service for financial advisors. Follow him on Twitter at @BobVeres.

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