Dodd-Frank Act Has Not Killed Industry Optimism

At the Securities Industry and Financial Markets Association’s (SIFMA) annual meeting, a panel of industry executives expressed concerns about the regulations, but kept an optimistic tone.  

Charlie Rose, host and executive editor of the Charlie Rose program, opened the discussion by asking the panelists for their overall thoughts on the Dodd-Frank financial reform act.  

Chet Helck, COO of Raymond James Financial, said new regulations are long over-due.  He said the industry is working with laws that were passed in 1933 and 1940 – and that the industry evolved past these regulations long ago.  He hopes that Washington started developing new regulations well before the 2008 meltdown.  Helck’s main concern is that the public sees Dodd-Frank as being a punitive act by Congress to punish Wall St.  That will not help to rebuild the public’s trust in the industry, he said.   

Kent Christian, Senior Managing Director and President of Financial Services Group at Wells Fargo Advisors, said he sees the regulations as having the potential to be “profoundly positive” for investors, adding that it can offer them improved transparency, access, and choice.   

James Allen, CEO of J.J.B. Hilliard, W.L. Lyons, said that overall, the industry welcomes regulation, as long as this regulation focuses on the long-term.  At the same time, however, the industry needs to make sure that new regulations don’t encumber economic growth.  

Walter Robertson, Senior Managing Director and President – Private Client Group at Scott & Stringfellow, said that regulators need to keep the consumers and clients–retail and institutional–in mind; they don’t want to be over-regulated.  Don’t ask them to put on five seatbelts in a car, was his example.   

Thomas Paprocki, CEO of The Zeigler Companies, said that any opportunity to get to know your clients better is a good one.  The Dodd-Frank act gives the industry a new context in which to discuss varying issues with clients.  However, the true impact of regulations can take years to fully comprehend.  So until everyone has a better grasp of how these regulations have changed the landscape, he predicts there will be some rough patches ahead.   

Examining the Positives and Negatives 

The panelists were in agreement that it was high time for new regulation to come to the financial services industry.  But they agreed even more earnestly that there were several problems with the Dodd-Frank act that need to be addressed.  

For one thing, all the panelists took serious issue with some of the unrealistic deadlines imposed on the regulators. One part of the act is supposed to be implemented by Christmas, they said. However, they wanted to see it done right, not fast.   

Helck was able to rationalize Congress’ actions in one sense.  He said Congress needed to make a strong statement, which it accomplished.  But its members didn’t think about operating rules and left regulators with an overwhelming task to iron out the details.  Helck believes Congress tried to take on too much with this one enormous act, when ideally; it would have focused on one piece at a time.  But clearly, its members did not have a lot of time, so now, before these regulations are implemented, Helck said the process needs to slow down and each piece needs to be thoroughly examined.   

Another possible consequence of the tidal wave of reforms is the eventual cost that firms will run into.  Allen said that the consumer will then suffer when either their costs go up, or their access is limited.    

Not only will consumers feel the blow from possible rising costs, but smaller investment firms will too, Paprocki pointed out.  Many firms don’t have the legal departments to handle compliance issues, he said.  Helck also pointed out that small businesses might be hesitant to grow to their fullest potential because of the uncertain regulatory environment.  Allen said that the uncertain and changing landscape provides an ideal opportunity for advisers to step up to the plate.   

But to end on a positive note, Rose asked the panelists whether they are optimistic about the industry’s future.  Across the board, the answer was a resounding yes.  Christian rounded out the discussion with this positive thought:  investors have a great amount of trust in their personal financial advisers and firms.  The lack of trust is squarely directed at the industry as a whole.  So, he said, the industry needs to take the trust they have on a one-on-one basis, and find ways to translate this to the industry as a whole.