Financial Planning columnist Bob Veres wrote in this month’s issue that “RIAs are facing a grave threat to their businesses. … The SEC and FINRA have responded to criticism over missing some famous, large-scale frauds by jumping ever harder on advisors who played no role at all in that ugly sequence of mistakes. Small fiduciary RIAs are suffering most from the consequences of the scandals. And we all know it's going to get much, much worse if FINRA takes over RIA regulation.”   Following the legislative proposal out of Washington on Wednesday that could clear the way for FINRA to regulate the advisory industry, Veres tells me: “What I found most interesting about the press release that accompanied the Bachus/McCarthy bill is its strong implication that the brokerage industry is the much safer advisory alternative for consumers, and that the RIAs are the dangerous rogue element in the profession. ‘Customers may not understand the different titles that investment professionals use but they do believe that “someone” is looking out for them and their investments. For broker-dealers that is true, but for investment advisers, it is all too often not true and that must change,’ Bachus said.

But as Veres sees it, “I don't think anybody is fooled here. This echoes precisely the lobbying position of SIFMA and FINRA, who have in the past simply dismissed independent, fee-compensated RIAs as ‘rogue brokers.’  When you look up where the lobbying money has gone, you find that Rep. Bachus's top 10 contributors include commercial banks (a total of $213,650 in 2011-12), insurance companies ($191,010), securities and investment firms ($184,277), finance/credit companies ($90,438) and "miscellaneous finance" ($89,250).  In the 2011-12 election cycle, he was the No. 1 fundraiser from commercial banks, finance/credit companies, and mortgage bankers and brokers.”  (The source for that information is the Center for Responsive Politics, a nonpartisan research group.)  

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access