FPA Weighs Decision On Lawsuit's Fate
After six years of debate and litigation, the controversy over broker-dealers getting an exemption to the Advisers Act of 1940 may be in its final stages.
Yet whether the final chapters of this drawn out saga will be conducted peacefully, or through a court battle, remains to be seen.
What's certain is that the Securities and Exchange Commission-after delays that inspired a lawsuit by the Financial Planning Association-decided unanimously on April 6 to allow brokers to offer fee-based advisory accounts without being regulated as investment advisors.
The SEC released the full 117-page ruling a week later, at which time FPA officials said they still had not decided if they were going to press on with their lawsuit against the SEC.
The FPA, along with consumer groups and other organizations, has fought against the exemption, arguing it would allow brokers to dole out investment advice without having to adhere to important fiduciary standards mandated by the Advisers Act. In its initial response, the FPA commended the SEC for enhancing the disclosure requirements for brokerage customers, including a requirement that fee-based brokers disclose that their interest may not always be the same as those of their customer.
The FPA also praised the SEC's decision to launch a 90-day study to identify the issues of investor protection raised by the rule proposal. But a lawsuit filed by the FPA in February to force an SEC decision on the issue remains active.
Some observers, like Roy Diliberto, the first FPA president and the initial point man on the issue, believe the association should press ahead with the suit, even if it stands little chance of success. The profession has received "a lot of favorable publicity," he says, so that the business will will come out ahead even if the lawsuit founders.
At press time, FPA officials said they were still reviewing the full ruling and no decision had been reached on how to proceed with the lawsuit. The FPA was expected to reach a decision by April 29-the date by which parties to the lawsuit have been asked to file any further petitions.
"We need to look at the rule itself, and see whether or not our board believes it satisfies the concerns we expressed when the lawsuit was originally filed," says Duane Thompson, the FPA's advocacy group director.
The brokerage industry applauded the move, after having argued that putting fee-based broker accounts under the auspices of both the Advisers Act and the Securities Exchange Act of 1934 would dissuade many broker-dealers from offering fee-based services. "Placing broker-dealers that offer fee-based brokerage accounts to their clients under an additional, and wholly unnecessary, layer or regulation could have severely limited the availability of these popular accounts," Marc E. Lackritz, president of the Securities Industry Association, said in a statement.
The ruling allows brokers to offer fee-based accounts outside the requirements of the Advisers Act as long as they meet certain requirements, including the stipulation that they provide investment advice that is "solely incidental" to their brokerage services.
The SEC went on to explain that "solely incidental" does not include exercising investment discretion or situations where "the broker or dealer charges a separate fee or separately contracts for advisory services."
The SEC also modified its original ruling in 1999 by expanding the disclosure requirements for exempt broker-dealers. The rule states that all advertisements, contracts and other documents related to fee-based brokerage accounts contain "a prominent statement that the account is a brokerage account and not an advisory account."
The disclosure would also have to explain that, as a result, the interests of the client and the broker-dealer may not always be the same.

Female Planners Have Reasons To Be Optimistic, Study Finds
Female financial planners are more optimistic about their practices than their male counterparts, and tend to have larger practices with more high-net-worth clients. Those were some of the differences between male and female practitioners that were identified by a new study released by the Financial Planning Association and OppenheimerFunds.
The study found "clear differences" in the way men and women approach their financial planning businesses in a wide range of areas, including practice management, practice size and business development. It also suggests that women have found success in the financial planning field and detected no evidence of a "glass ceiling" that is holding women back.
The survey of FPA members was conducted in August and September through an online questionnaire. Information was collected from 140 men and 184 women. The survey has a margin of error of 4%.

Fidelity Expanding Commitment To RIA Business
Fidelity Brokerage Services is sending signals to registered investment advisors that it wants to overtake Schwab Institutional as the nation's leading custodian for independent RIAs. Ellen McColgan, president of the brokerage services unit, told advisors exactly that at the firm's annual conference in Palm Beach, Fla., in early April.
Meanwhile, several financial services executives who have interviewed with senior Fidelity management for the open position of president of the RIA business say they came away with the distinct impression that Fidelity wanted an executive with experience in running a large organization, indicating how ambitious their growth goals are. That position opened following the resignation of its longtime president, Jay Lanigan, at the turn of the year.
Interestingly, when Schwab placed Deborah McWhinney in charge of its institutional business several years ago, they chose someone out of the banking world with the same sort of experience that Fidelity reportedly is seeking. In early April, Schwab also named longtime executive Charles Goldman as chief operating officer of Schwab Institutional, reporting directly to McWhinney, indicating its desire to expand its management team.
Under Lanigan, the Fidelity Registered Investment Advisor Group grew very quickly, doubling its assets under custody in the last two years. Yet advisors who have spoken with top Fidelity executives say they got the impression that the Boston-based financial giant was willing to invest more capital to expand market share and that Lanigan was overly concerned with the bottom line.
One sign of their growing interest in the RIA business came when Ned Johnson, Fidelity's CEO, held a town hall-type Q&A session with advisors. Several attendees say Johnson made it clear that "our business was of significantly more interest to Fidelity" than it was several years ago. "His depth of knowledge about our business was quite impressive," this advisor says.
At the meeting, Fidelity also announced the launch of an integrated, single sign-on technology platform designed to help independent RIAs simplify workflow and increase operational efficiency. The platform is being developed on .NET, a Microsoft Web-based technology. Fidelity expects the initial release of the platform later this year, with an enhanced version to follow in early 2006.
According to Patrick Jancsy, senior vice president at Fidelity Registered Advisor Group, the initial release will integrate Integrated Decision System's (IDS) portfolio management and trading tools, NaviPlan financial planning software from EISI, and Fidelity's existing Advisor CHANNEL platform.
When the platform is fully built out some time in 2006, it will offer contact management, account servicing and practice management support in addition to trading, portfolio management/reporting and financial planning capabilities. No decision has been reached yet with regard to CRM software partners. According to Jancsy, Fidelity is currently conducting research to determine what systems are being used by their RIA clients today. "Although no decision has been reached, I would not be surprised if we aligned with multiple third-party CRM providers," he said.
Practice management support will include access to third party providers from within the platform. For example Fidelity already offers a business transition program, access to a third-party compliance provider, and discounts on a range of other services used by RIA firms.

LPL Hits The Road To Help Advisors Train Staff
Linsco/Private Ledger (LPL) has taken to the road in an effort to train its advisors and their staff in all aspects of the financial advisory business.
The firm has launched the "Fast Forward" training program, which will make stops at 12 cities throughout the country during the course of the year. The effort started in San Francisco, where a three-day program was held from March 30 to April 1.
The Fast Forward program offers advisors and their staff courses on topics that include LPL technology, building a fee-based practice, marketing, investment products, practice management, business processing, client service and wealth management strategies. The courses are taught by a mix of LPL professionals, industry experts, product specialists and other guest speakers, the company says.
The program also includes regional business development events, various online learning modules and LPL's national conference, the company says.
"Fast Forward's extensive course offering and CE-approved content addresses the training needs of everyone from the most experienced LPL financial advisor to new advisors just joining the firm and sales assistants," says Rochelle Putnam, LPL's executive vice president of service and training. "Based on the feedback so far, we think this is a training program that enables our advisors to develop the advanced skills they need to build the businesses they want."
Fast Forward city tours are planned this year in Tampa Bay, Baltimore, Chicago, Dallas, New York, Boston, Denver, Seattle, Philadelphia and Detroit.

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