The devil in the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act can inevitably be found in the details of rule-making. But Tom Bradley, president of TD Ameritrade Institutional, believes that when everything shakes out at the end of the day, RIAs may not be as displeased as some expect.

"My worry is that we create a quagmire that entangles the business without improving investor protection and increasing costs that eventually get passed on to investors," Bradley says. "We don't need more regulation; we need better regulation."

With austerity now the chief priority on Capitol Hill, the risks are increasing that a budget-constrained Securities and Exchange Commission could consider turning RIA regulation over to FINRA. "There will be a significant uproar," Bradley believes.

All of which could hamstring the implementation of the labyrinthine Dodd-Frank legislation. "Advisors don't believe FINRA understands their business and they don't believe FINRA has been an effective regulator of the brokerage business," Bradley continues. "Advisors think FINRA has been too close to the brokerage business and they think the SEC has a better understanding of RIAs."

Despite these concerns, Bradley is cautiously optimistic that the benefits of Dodd-Frank will outweigh the costs and that if the playing field is tilted at all, it may be more favorable to RIAs than others. "It should do a more effective job of regulating the financial services business," he says. "Still, RIAs will probably come out on top with regulations that differentiate the value of their business model."

Why? "It will be very difficult for the SEC to do anything but apply a broad fiduciary standard to anyone providing personalized financial advice," Bradley says.

However, one of the securities industry's chief functions in the economy is to aid in capital formation. By most definitions, marketing and selling initial public offerings is hardly a fiduciary activity, yet it serves a critical purpose in generating growth and jobs. "Wall Street will be able to continue to sell new issues, but the folks who distribute them will be held to higher disclosure standards," he says. "It [Dodd-Frank] will change the landscape of the entire financial services business."

In the almost 11 years since Bradley has run TD Ameritrade Institutional, its assets have swelled from $9 billion to about $135 billion. Over the last decade, he has seen sweeping changes ripple through the RIA world.

Although TD Ameritrade Institutional has some huge RIA clients, such as Ken Fisher's Fisher Investments and Ric Edelman's Edelman Financial, the custodian also has thrived serving smaller RIAs. Bradley thinks the increased cost of regulations and compliance may ultimately drive further consolidation in the business.

About 50% of the breakaway brokers who affiliated with TD in 2010 joined an existing advisory firm, and he expects that trend to continue. "Big RIA firms often have additional capacity and they can plug new advisors into their back offices and increase revenues" at little additional cost, he says.

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