A uniform fiduciary standard might keep the wolves of Wall Street at bay, but only if regulators take great care in crafting the regulations. And is that likely to happen? Probably not, according to Frank Reilly, President of Reilly Financial Advisors.

“If they were to do it correctly, I think it would be a fabulous idea. But I don’t think it can be done correctly,” said Reilly, who doubles as the firm’s chief compliance officer.

The battle lines on regulatory change were drawn up in the aftermath of the 2008 financial crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the Securities and Exchange Commission the power to regulate those brokers who provide retail investment advice into always acting in the best interests of their clients. The SEC, however, demurred for a while on whether or not to use that power.

“A strong uniform standard, however, could really protect investors from retail products that later turn out to be poor investment options,” Reilly said. “Then everybody out there would only be doing what’s in the best interests of their clients. … We see every day where annuities are sold into an IRA account. That never makes sense …” Reilly told The Suit Magazine.

SEC Chairman Mary Jo White said earlier this year, that she intended to push the other commissioners on whether or not they wanted to adopt a new standard. This came after a year of waffling that saw the SEC receive an earful from lobbyists.

“The existing regulatory requirements, oversight and enforcement of rules governing registered representatives’ conduct, work well to protect investors, and have proven to be an efficient and effective way for middle and lower income market investors to retain access to financial products and services,” the National Association of Insurance and Financial Advisors asserted in a statement released in July of 2013.

Real action after White’s remarks in 2014, has yet to come, however. Still, even the possibility of a uniform standard remains a hot issue among financial professionals.

“Crafting those regulations without watering down standards across the board remains an obstacle to regulatory change as well – and lobbying by broker interest groups is sure to make that obstacle a challenging one,” Reilly said, noting that, “Stronger uniform standards could help push aside some of the typical client worries that follow the financial industry like a dark cloud”.
Regulatory change or not, ethics and client interest are points of pride for Reilly Financial Advisors. The company prominently displays a number of awards it has received in recent years, including Top 100 Places to Work in San Diego for three years running, plus a BBB Torch Award Winner for Marketplace Ethics in 2012— and Reilly said firmly that he is determined to always keep clients first. Putting client’s needs ahead of the firm also often means taking an unorthodox approach to wealth management.

Noting that risk tolerance questionnaires administered by most wealth managers to new clients fails to capture what really matters, Reilly emphasized, “I believe, and we believe, that it is a fundamentally flawed process. It really comes down to how much risk do you need to take. If you could accomplish all of your goals … lay them out, chart a path, reach those goals with an 8 percent rate of return … Why would you [take on more risk]?”

Instead, Reilly Financial Advisors looks at how much risk the client needs to take, not how much risk they can bear. That’s a key difference in mindset, allowing the firm to provide each client with a unique solution.

Founded in 1999, the company originally served Americans living abroad – a demographic that still makes up about one third of its customer base. Now, the firm focuses primarily on those in transition, whether it’s the newly wealthy, career-changers or families looking for solid family transition planning. The firm’s approach to risk also helped it weather the Great Recession by choosing to keep clients constantly in the loop, instead of leaving them in the lurch. “We realized that our clients needed constant communication … so many advisors hid from their clients,” Reilly said. “We wanted to make sure … the talking heads weren’t scaring them.”

Working through that crisis was about wealth management – not just investment management. It took holistic thinking for Reilly’s clients to not only weather the storm, but even, in many cases, to get to port in better shape than when they left. Now, with the crisis largely over, Reilly is looking to expand again with goals he ticks off like a shopping list.

Smaller starter accounts, expanding the client base, more international agreements – the list goes on – but it’s that multi-pronged approach that makes all the difference between a wealth manager and a guy who merely helps people invest.

“Wealth management is looking at everything: investment management, financial planning, tax issues, estate issues, family wealth transitions – all of those in one,” Reilly insisted. “We’re not just investment managers, we are truly wealth managers.”

For more information, visit: www.rfadvisors.com