Now let's switch to real world. The SEC says, "We're only getting out to see these advisors once every 10 or 11 years." I think everybody agrees that's not often enough.
So that's where an SRO like FINRA comes in and says: "Hey, we can do this. We go into our regulated firms every other year, which feels better to the industry and to investors." Should we have an SRO? I'm not sure. Are we going to? I think we're going to because of the economics involved.
Brackett: The biggest fear is when you say self-regulatory. Does the investor -- or do we -- believe we will be as stern with ourselves as somebody from the outside? I believe we would.
BAR Financial is the single largest asset of mine. I am not going to allow anybody to affect it negatively. We're going to do this business clean, right, and appropriately or someone's going to leave the firm. So I believe in the self-regulatory bodies. We understand our business and we do it right.
Randal Langdon, president, Lindner Capital Advisors: There's a challenge in terms of the public's perception of self-regulation. Look at the recent occurrences at Berkshire Hathaway. When Warren Buffet was faced with his dear friend (David Sokol) and likely successor doing something that...does not pass the smell test, and says emphatically, "There is nothing wrong with this..." That's something we have to deal with and, unfortunately, may become a big hurdle for everyone in the industry.
FA: Let's talk about the emerging Department of Labor regulations regarding disclosure and advice to retirement plans and how that impacts the financial services industry.
Schweiss: This issue is near and dear to my heart. Part of my responsibilities at TD Ameritrade is overseeing our 401(k) platform. There are four key rule makings now at the DOL.
One is: any service provider and ERISA plan is going to have to disclose their services and their fees in writing, and their compensation in writing, as well as 12(b)1 fees, spreads from deposit products, you name it.
Also, plan administrators, that is, employers, are going to have do more disclosures to participants related to investment options in the plan, expenses in those options, estimated returns, and fees the employee is being charged.
The more controversial rules coming could upend this industry. One concerns the definition of "fiduciary," which basically broadens who's going to be considered a fiduciary to a retirement plan.
At the Tiburon CEO Summit, some executives told me this could spell the end of the brokerage business with respect to retirement plans.
The last proposal is that if you provide advice to a retirement plan, including an IRA, it can either be on a level fee basis, meaning a flat annual retainer, or a percentage of assets under management. Or you need to select investments for that retirement plan account owner using an independent computer model like Morningstar, not your proprietary model. They want to completely remove the conflicts in investment advice to retirement plan owners.