More Wall Street Than Main Street

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NAPFA 2012-06-20 Press Release

I’ve written extensively (here, here, here and here) that more regulation does not make consumers any safer. What many don’t realize is that the wrong regulatory environment can be devastating. Because it comes from government, there is no escaping it. Such is the case with the current push to give FINRA the oversight of registered independent advisors. The National Association of Personal Financial Advisors (NAPFA) released a press release recently entitled, “More Wall Street Than Main Street” which read in part:

How is FINRA more Wall Street than Main Street?

  1. FINRA’s member firms are some of the Wall Street broker-dealers who so recently created and sold to unsuspecting consumers the credit default swaps and toxic-mortgage-backed securities, which in large part led to the recent financial crisis.
  2. FINRA collects fees from member firms and is managed by Wall Street insiders.
  3. According to the Project on Government Oversight (POGO), FINRA executives are highly compensated with $13 million paid out to their top ten executives in 2010. POGO correctly asserts that FINRA should be “benchmarking its compensation packages against those provided by federal agencies such as the SEC.” For example, an On Wall Street Salary Survey for 2008 revealed that FINRA’s top executives were compensated approximately ten times more than appointed leaders at the SEC. There is no indication that the disparity in compensation has been reduced between the two organizations.

This is approximately the same stance as the CFP Board recently took.

We take a great deal of criticism for our zeal about fee-only financial planning and fiduciary responsibility. But we don’t think you can have too much zeal working to insure that your retirement and financial well-being is in the hands of advisors free from the conflict of interests associated with commission-based product salesmen.

We certainly don’t want their regulatory group writing the rules for fee-only registered investment advisors!

Here is my favorite quote from the NAPA Press release:

“FINRA is an organization that is out of touch with the independent advisory community and with the American public,” said NAPFA National Chair Susan John, CFP®. “An organization that is designed to attend to commission-based broker-dealers and wirehouses has no business overseeing independent advisors who, by law, work in the best interests of their clients first.

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President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.