SEC Chair Gensler’s Confirmation Hearing Displays Parties’ Priorities

Democrats used Gary Gensler’s confirmation hearing to speak to issues of racial and wealth inequality exacerbated by the pandemic—which has killed more than 500,000 Americans and caused a surge in unemployment—while Republicans focused squarely on the potential of government overreach.


The Senate Committee on Banking, Housing and Urban Affairs held a rare joint confirmation hearing Tuesday morning in which its members questioned Gary Gensler, the Biden administration’s nominee for the role of chair of the Securities and Exchange Commission (SEC), as well as Rohit Chopra, the administration’s nominee to head the Consumer Financial Protection Bureau (CFPB).

The nominees received nearly equal numbers of questions from committee members, who were given free range to interrogate both candidates interchangeably. This resulted in a somewhat fragmented but still informative discussion that helped spell out some of Gensler’s and Chopra’s potential priorities as key members of President Joe Biden’s cabinet, should they be confirmed.

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Both Gensler and Chopra received glowing endorsements from the committee’s majority Democrats. On the other hand, the Republican committee members were clearly more skeptical about these picks, especially when compared with the positive tone of the hearing enjoyed nearly a month ago by Boston Mayor Marty Walsh, Biden’s pick for the role of secretary of labor.

Led by Senator Sherrod Brown, D-Ohio, the committee Democrats emphasized the role that the CFPB and, to a slightly lesser extent, the SEC, can play in helping to address the nation’s severe and unacceptable degree of racial and economic inequality. They encouraged both Gensler and Chopra to prioritize policies and regulations that put working people first and that provide targeted and meaningful support to disadvantaged communities—both to address the ongoing coronavirus pandemic and to more holistically serve the nation as it eventually emerges from its current state of crisis.

Ranking Member Pat Toomey, R-Pennsylvania, in questions repeated by his Republican colleagues on the committee, asked whether Gensler and Chopra would allow the SEC and CFPB to engage in politically motivated activities, for example in the areas of climate-risk disclosure mandates or in actively promoting racial and gender equity on public companies’ boards. Both nominees said they understood the concerns of the Republican senators, agreeing to work in a bipartisan fashion should they be confirmed.

“The economy is moving towards recovery, and we need to make sure the SEC and CFPB do not overburden the markets and reverse this economic recovery,” Toomey said.

Various senators asked Gensler what the SEC can do to address the so-called meme-stock phenomenon. He said the regulator can take steps to help improve trust and confidence in the stock market as a whole, and it can work to address the specific situation of GameStop’s stock and its interaction with private equity (PE) and short selling.

“In some ways this story is actually as old as markets themselves,” Gensler said. “This is about the age-old and ongoing clash of buyers and sellers with opposing views. However, this latest story is also clearly about technology and fairness. We have to ask how to ensure that customers of all types, retail investors included, get the best execution possible regardless of order flows. We have to find ways to ensure customers have stable and reliable access to the markets, and to promote better back office infrastructure to reduce costs and increase security.”

Responding to questions first raised by Toomey but repeated by his Republican colleagues, Gensler said he will be very focused on the concept of “materiality” in any work he does to create new requirements in the areas of environmental, social and governance (ESG) disclosures. He also said he would focus on the importance of promoting disclosures about the racial and gender diversity of the leadership of publicly traded companies, again keeping the concept of materiality front and center.

Responding to related questions from Democrats and Republicans, Gensler also committed to reviewing the SEC’s recent regulatory actions regarding the proxy voting marketplace, suggesting in broad terms that proxy voting advisory firms have an important role to play in supporting institutional investors and pension funds.

Gensler was also questioned about the possibility of requiring public companies to disclose political donations made in the normal course of business. Several of the committees’ Democrats suggested that corporate executives often use company funds to make donations in the name of their company which also happen to benefit themselves as private citizens.

“Accurate and relevant disclosures are critical to investors and markets in the promotion of capital formation,” Gensler said. “I cannot prejudge specific issues, but, as I’ve said, I will be firmly grounded in the concept of materiality when considering what type of disclosures may be required. I will say that investors rightly want to know what the companies they own are doing in the political arena. There is very strong investor interest in this information.”

Even Top Financial Advisers Have Been Hurt by COVID-19

However, many are implementing new practices and technologies to combat these effects.



Even the most successful financial advisory firms have felt the negative impacts of COVID-19.

That’s among the latest findings revealed in Nationwide’s “Advisor Authority” study, which found only 57% of top advisers and financial professionals believe their practice will grow in the next 12 months, a sharp decline from 81% who said the same in 2019. Additionally, these advisers cited the pandemic as a key concern when thinking about the success of their practice.

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Powered by the Nationwide Retirement Institute and conducted online by The Harris Poll, the study surveyed 2,500 advisers and financial professionals. It defines “successful advisers” or “top advisers” as those who earn a personal annual income of $500,000 or more from their advisory business or who individually manage assets under management (AUM) of $250 million or more.

The study finds that even though only 37% of high performers reported an optimistic financial outlook last year, many are looking ahead to enhance the profitability of their practice in the coming year. Fifty percent of top advisers said adding new clients will be their top priority to enhance profitability.

High-performing advisers also indicated health and safety for employees (31%) and themselves (31%), digital remote work strategies (28%), addressing decreased profitability (28%) and digital experience/self-service tools for clients (27%) are top practice management concerns related to the pandemic.

“The pandemic was an outsized challenge for advisers and financial professionals of every level, but the most successful advisers are adopting a CEO mindset to protect their clients and their practices,” says Craig Hawley, head of Nationwide’s annuity distribution, in an interview with PLANADVISER. “This is marked by several traits, including putting clients first, committing to an exceptional customer experience, leveraging technology and being bullish on M&A [mergers and acquisitions].”

As advisory firms became more reliant on technology as a result of the remote work environment, top advisory businesses evolved their practices to enhance profitability. Financial advisers turned to webinars, audio, short-form video content and even started advertising online.

Now, Nationwide says more firms are looking to adopt digital platforms in the coming year, as 22% of successful advisers said they are adding new technology while 17% are consolidating their digital experience.   

Thirty-seven percent of top advisers indicated that adding digital features helped them effectively serve clients remotely, while others said it freed up time to focus on one-on-one relationships with clients (31%) and provided more personalized, holistic planning (30%). When asked what technology would help better serve their clients over the next 12 months, 29% mentioned e-signature solutions, 26% indicated financial planning software tools for risk management and 19% voted for customer relationship management (CRM) processes.

The market volatility experienced last year made many worry about a potential economic downturn in 2021. The Nationwide study found 80% of successful advisers are concerned about an economic recession in the next 12 months.

As a result, protecting against losses outranked all other client concerns for all advisers and financial advisers, according to the study. Ninety-five percent of top advisers said they have strategies to protect their clients’ assets against market risk while 96% said they have strategies to protect clients against outliving their savings.

More than eight in 10 (82%) of all advisers said their clients would feel more secure if a portion of their portfolio was invested in an annuity and 77% said they would choose an annuity in the next 12 months to protect against market risk. Breaking it down to top advisers, 79% said their clients would feel more secure if they were invested in an annuity and 81% said they would choose an annuity option within the next year.

The Nationwide study finds that top advisers are focusing their attention on Generation X workers. When asked which generation of investors would be their primary target in the next 12 months, 37% indicated this generation, which is in the middle of the workforce, as they are more likely to feel squeezed by the effects of the pandemic. Other advisers said they would focus on Millennials (28%), Baby Boomers (19%), Generation Z (10%), Matures (those born in 1945 or earlier) (1%), and 7% said they were targeting all generations.

The most successful advisers are directing their attention toward wealth changes. These advisers are more likely to have a strategy in place to retain heirs of current clients, at 84% versus 68% of all other advisers, according to the study. For those with a strategy, working with clients’ heirs in the financial planning process (38%) was their top approach, along with creating multi-generational teams and partnering with estate attorneys.

“Targeting new clients and retaining the heirs of current clients are important components of both the CEO mindset and enhancing practice profitability,” Hawley says. “When targeting new clients, successful advisers and financial professionals are interested in younger generations, including Gen Xers and Millennials, and they are also more likely to change their marketing strategy to reach these individuals. To retain heirs, successful advisers are open to building a multi-generational team, offering innovative wealth transfer solutions and partnering with experts such as estate attorneys.”

 

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