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LPL advisors to ramp up advocacy as states consider fiduciary rules

With more states considering their own proposals around fiduciary standards, the country's largest independent broker-dealer is issuing “an advisor call to action.”

LPL Financial is billing its new 50 State Network as a grassroots initiative helping its 16,000 advisors to engage with elected officials and regulators about financial policy issues on their home turf, where they can be seen as constituents, rather than outside lobbyists. The program comes as fiduciary proposals are cropping up in statehouses.

Earlier this month, lawmakers in Maryland introduced a bill that would impose a uniform fiduciary duty on brokers and advisors. A similar proposal is further along in Nevada and New Jersey, and officials in a handful of other states have been considering new rules for advisors working with retail clients.

LPL opposes conflicting state standards for advisors as the SEC works on the Regulation Best Interest proposal expected to be issued later this year in the wake of a court decision last March vacating the Department of Labor’s fiduciary rule. Other IBDs have taken the same stance.

"I can only assume that LPL and other brokerage firms are paying more attention to the states because of the potential for legislative activity in response to [the collapse] of the DoL fiduciary rule," says Duane Thompson, senior policy analyst at Fi360, a fiduciary consultancy. He also notes that firms such as LPL will want to make their voices heard on issues like the emerging trend of state-sponsored IRA programs and other proposals that affect wealth management.

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LPL has a number of other issues on its policy agenda, including efforts to incentivize retirement savings and win favorable tax treatment for retirement products, preserve independent contractor status for its advisors, and strengthen safeguards for senior investors.

Advisors in Nevada and Maryland “have been actively participating” in discussions around the states’ fiduciary proposals, LPL says. With advisors like Larry Leitch, Jamie Cox and Mike Brady taking on additional efforts such as meetings with Department of Treasury officials and testimony at IRS about the new tax deduction for pass-through entities, the firm sought to create a formal program for more advisors to make their voices heard.

The network’s activities will include training and educational programming with LPL’s government relations team and collaborative outreach to the local, state and federal officials in advisors’ hometowns.

"Our advisors and their clients are in all 50 states and all congressional districts," says Peggy Ho, LPL’s head of government relations. "They are best positioned to know what is happening in their local area, and they are best able to provide critically useful information to our representatives."

The firm also plans to double its in-house lobbying shop in Washington from one to two “in the very near future,” Ho said in an email. LPL is “closely monitoring” the state efforts and expects the advisor network to get involved “to the extent it is constructive,” she said in an email.

The firm puts it more bluntly in a position paper championing the SEC's proposal for a federal best-interest standard and arguing against state efforts to set fiduciary standards.

"We will continue to work with the SEC on its rule proposals while also engaging proactively with state legislatures," LPL wrote. "In this regard, we emphasize the need for a single standard of conduct; it is untenable for financial advice to be subject to conflicting standards from the SEC, the states, and possibly even cities and counties. We need a clear harmonized best interest standard."

Tom Tye, an LPL advisor who runs the Danville, Kentucky-based practice Tye Financial Group, has been active in local politics and engaging with policymakers in his state and Washington for several years. The increasing number of fiduciary proposals bring new intensity to advisors’ political engagement and an incentive to get involved at the state level, he says.

"A lot of states are writing their own rules, which to me is a little frightening, because suddenly you're going to end up with a patchwork of regulations, which could be pretty onerous, if you're not careful," Tye says.

He recalls an earlier meeting with Ho and her team. Using the time-honored political saying that “If you’re not at the table, you’re on the menu,” she warned against the consequences of not being involved.

"That kind of struck a chord with me," Tye says. "There's people out making rules, making decisions. Unless they hear my voice, they don't really know what my desires are."

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