David Tittsworth, executive director of the Investment Adviser Association, says lobbying the SEC and lobbying Congress are two different animals. "[The SEC] is a more technical venue than Capitol Hill in that you have people who know a lot about very discrete subjects and have a tremendous amount of expertise," he says. "Whereas on Capitol Hill, it's hard to find members of Congress who know the basic difference between investment advisors and broker-dealers, much less their staffers."
Agreed, says Roper. "There's a limit to what you can do from a lobbying perspective because this isn't the traditional process. There's a study that has to be done and we hope it will be a fact-based exercise. We're of the position that the facts clearly support the fiduciary standard."
Others, of course, disagree.
And they will also do their best to make their views known in the coming months.
Does Schwab's Purchase Of An RIA Portend A New Trend?
In a major move to offer institutional and retail clients more investment solutions, Charles Schwab Corp. announced at summer's end it is acquiring Windward Investment Management for $150 million.
The acquisition of the Boston-based independent RIA represents a departure for Schwab, which is the largest provider of custodial services to independent RIAs. Schwab chiefly focuses on organic growth and the few acquisitions it has made in recent years-U.S. Trust in 2000 and the private asset management business of State Street Corp. in 2003, for example-have typically involved large institutional businesses.
Windward relies on a quantitative, risk-controlled strategy to manage $3.9 billion in assets--primarily ETFs--for individuals, other RIAs, non-profit organizations, and retirement plans. The high premium that Schwab paid clearly reflects the firm's 56% annual growth rate over the past five years.
"When viewed just on assets and revenue, the valuation might be considered rich," says David Selig, CEO of Advice Dynamics Partners, an M&A consulting firm in Mill Valley, Calif. "But when you look at the intellectual property and goodwill with this acquisition, clearly Schwab saw value."
Windward blends active and passive management in search of risk-adjusted returns with an emphasis on downside protection. The approach employs a broad range of global markets and assets, including equities, fixed income, hard assets, real estate and currencies. The company rebalances its portfolios three times a year (sometimes more, depending on market conditions), and invests in indexes through low-cost exchange-traded funds, exchange-traded notes and registered funds. It might use individual securities, such as money market funds when it holds cash as an asset.
The firm's founder and chief investment officer, Stephen Cucchiaro, and his investment team will remain at the firm. Schwab is clearly betting that it can continue to drive Windward's growth by offering its services to independent RIAs at a lower cost, as well as to retail investors through its managed account platform. Schwab CEO Walt Bettinger remarked that the emphasis that Windward's investment style places on risk management is "an ideal approach for today's world."