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Should RIAs Get More Involved in Washington?

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WASHINGTON -- TD Ameritrade is urging advisors to take a more active role in advocating for policies that could advance the industry, particularly for measures that could set RIAs apart from the rest of the industry in the eyes of consumers.

This week, the firm rolled out its "advocacy action tool," an online portal where RIAs can register to receive updates on pending regulatory issues and submit comment letters to members of Congress and federal authorities mulling new rules.

"For us, advocacy is an everyday thing. It's not about a campaign," Tom Nally, president of TD Ameritrade Institutional, said here at the firm's advocacy summit. "We want to advocate for balanced and impactful regulation."

Skip Schweiss, TD's managing director of advisor advocacy, explains that independent RIAs, as a group, have struggled to gain a foothold in Washington. They have been outgunned by the better organized lobbying efforts of other corners of the financial services industry.

"By nature, investment advisors are a very independent lot. They structure their businesses differently, each and every one," Schweiss says. He also notes that there are many trade groups that represent different factions of advisors

The downside of that "fragmented set of voices," however, becomes evident in Washington, he says, where a splintered industry does not stand up well to opponents that can offer a more unified voice in policy-making.

So TD is positioning its advocacy tool as a call to action, offering RIAs updates on developing legislative and regulatory proposals that would impact the industry. It also offers letters that advisors can personalize and submit to representatives in Congress to weigh in on an issue.

The online hub -- available to all RIAs, not just those that custody with TD -- carries the tagline "Take action, be heard," affirming that "there is strength in numbers."


At launch, TD's advocacy site is focused on the effort to increase the frequency of advisor examinations. The SEC has said that advisors are examined, on average, only once every 11 years, and around 40% of registrants have never been visited by commission inspectors.

That lax oversight -- which the SEC acknowledges is insufficient -- worries firms like TD Ameritrade and organizations like the Investment Adviser Association and the CFP Board, which have been advocating for more funding for exams. In large part, the fear is that one bad advisor could scandalize the industry and prompt new regulations that would, in turn, hurt small independent advisors.

"The lack of adequate oversight of registered investment advisors not only puts investors at risk, it has the potential to damage the reputation of ethical, upstanding firms and the RIA industry as a whole," TD cautions. "Regulators and legislators need to stop endlessly discussing the issue of improving investor protections and start taking action."

TD has prepared a letter that advisors can send to their representatives on the dangers of the current examination regime. It cautions against bringing in an outside organization such as FINRA to conduct RIA exams. Instead, it suggests alternatives to increasing exams, such as retaining SEC oversight but authorizing a third party to review RIA shops, similar to how CPA firms go through the books of public companies. Alternatively, the letter suggests that Congress could increase the threshold of assets under management that determines whether an advisor registers at the federal or state level. A third option: authorize the SEC to collect user fees from registered advisors to fund more exams.


In part, TD's leaders are concerned that the independent advisor industry is fighting a battle of perception. Nally cites a consumer survey by public relations firm Edelman that rated financial services near the bottom of the "trust barometer," placing below industries like chemicals and pharmaceuticals.

In a recent survey from the CFP Board, 60% of respondents said that they believe that financial advisors put the interests of their company ahead of their clients. In that poll, the term "advisor" was broadly defined to include non-fiduciaries such as brokers and insurance agents. But advisors bristle at the notion that they are seen as providing equivalent services as brokers when the two professions are held to notably distinct standards of conduct.

"Investor confusion still remains. You know that most people really don't even understand the difference between a fiduciary advisor and a brokerage advisor that operates under the suitability standard. They just don't get it -- they don't understand," Nally says. "I think that we have a lot of work to do. We've got a lot of investor confusion to clear up. We've got to make sure that we preserve and protect and promote that fiduciary standard."

And it's not just consumers that TD is trying to make aware of the fiduciary distinction. Schweiss contends that the RIA sector has "a great story to tell" in Washington, and is urging more advisors to make their lawmakers aware of the business model and the customer-first, best-interest ethos of the industry through channels like the new advocacy portal.

"A lot of advisors tell me they just don't even really know how to get involved," Schweiss says. "We want to involve advisors in these issues far, far more than the fraction of a percent who are involved today."

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