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When Bernard Madoff was carted off to jail, he left track marks on the whole financial advisory community. Even today, his shadow hovers over the advisor/client relationship, at the core of which is that all-important ingredient-trust. Following the Tiburon CEO Summit XX in New York City in April 2011, six leaders in the wealth advisory profession presented their views in a roundtable discussion. The 90-minute conversation was a spirited debate. Financial Advisor magazine Contributing Editor Bruce W. Fraser moderated the discussion. Part One of this transcript ran in the June 2011 issue of Financial Advisor magazine.  Part Two, which follows, provides additional insights and observations.


Financial Advisor:  Should there be a self-regulatory organization for investment advisors? 

Stuart DePina, CEO, Tamarac Inc:  The industry needs to develop a self-regulatory organization. The reality is similar to what happened in the accounting profession in 2001 when the Sarbanes-Oxley Act was put into place. 

As John Brackett said earlier in today's conversation, the industry needs to start the process, expand the dialogue, and give us a clear system of rules to follow. If we can't do that, then others who think they understand what goes on within this industry will start to define the rules we need to follow.  In the end, the investor will suffer from our lack of ability to provide clear, consistent advice.

John Brackett, partner, BAR Financial LLC:  I couldn't agree more.  We know.  We know.  And when we bring in an outside entity to regulate this business they focus on the wrong things - even though they believe they are doing the right thing for the consumer, but they harm that person. 

The reason we have so many rules is that there are not as many good guys as we would hope there are. Once you get outside of this room, where we see ourselves as good guys in white hats, it's a different story.  So I believe regulation needs to come from inside, not outside. 

Scott Hanson, CFP, co-founder, Hanson McClain Advisors: I too think an SRO would be good for advisors.  The way FINRA regulates registered representatives today is so rules-based; every time an issue arises, there's another 10 sets of rules. I almost feel like in an audit no one's actually looking at what the business is. I'd rather see a principles-based system on both sides.  

Michael Kay, CFP, president, Financial Focus LLC: The idea of a self-regulating organization is necessary and important, just as in the accounting industry, where best practices are tested and looked at by other firms.  I'm not arrogant enough to suggest the right structure, but some kind of tiering based on the type of business would probably be appropriate.

Skip Schweiss, president, TD Ameritrade Trust Company:
In the ideal world, the SEC should continue to be the oversight body for investment advisors. They understand investment advisors, they created the rules, and have overseen registered investment advisors for 71 years now.  I feel they know what they're doing.