When it comes to the work we do at the Financial Services Institute (FSI) advocating on behalf of independent financial advisors and independent financial services firms, the spotlight almost always shines brightest on what is happening at the federal level. What happens at the state level, however, is just as important.
We have developed very clear and constructive strategies for influencing the regulatory and legislative processes in states across the country to preserve access to advice and help advisors’ businesses.
Key state-level bills and rule proposals we have been monitoring closely throughout 2017 – and will continue to monitor in 2018 – include:
Preventing Elder Financial Abuse:
While we may see eye-to-eye with the states on some issues, preventing financial abuse of the elderly is a critical initiative everyone agrees we need to work together to address. As advisors know, one of the key impediments to protecting vulnerable seniors is the threat of litigation against advisors and institutions who intervene to stop potentially fraudulent activity and, in the process, run afoul of privacy rules.
We were proud to actively support bills in 28 states this year that will help combat elder financial abuse by extending protections against litigation for concerned advisors and institutions, including adoption of the NASAA Model Act in several states. We also helped shepherd a crucial measure through the Texas legislature. We collaborated with a coalition to draft legislation and had a prevention of elder abuse bill introduced during this legislative session in Texas. The bill passed overwhelmingly and has been signed into law by Governor Greg Abbott.
Additionally, the states and NASAA have been instrumental in providing useful resources not only for investors, but also to firms and advisors. NASAA recently released a helpful worksheet listing the red flags to look out for to spot abuse by a guardian. The PA Banking and Securities Division issued an entire toolkit to assist firms and advisors in learning more about the issue and directing them to valuable resources. Whenever these useful tools are released we add them to our elder abuse resource page on our website and also alert our members through weekly communications.
What goes on in the states doesn’t always garner the attention it should. But the work outside of Washington, D.C. matters. And we will continue to invest in shaping future state legislation and regulation for the health of our industry and the protection of investors.
State-Run Retirement Plans:
State legislatures around the country continue to try to take voters’ retirement readiness into their own hands by establishing state-run retirement plans for private sector workers. Most of the plans proposed each year would be based on a mandatory enrollment (referred to as the ‘secure choice’) model.
We believe state-run plans would disrupt existing, competitive marketplaces for retirement plan services in each of the states where they have been proposed. Moreover, operating such plans would place enormous new burdens on state governments across the country, which are already running on extremely tight budgets. This is especially true since the repeal in May of the DOL guidance that would have exempted state-run plans from many of the requirements of ERISA.
FSI is pleased to note that, with strong engagement from our members, we were instrumental in stopping state-run retirement plan bills in six states this year. Even in states where such bills have been defeated in the past, however, advisors and firms must remain vigilant and engaged in advocacy activities in order to protect their businesses and clients from efforts to re-introduce these measures. The bill we successfully advocated against this year in New York, for example, was first proposed in 2015 and has been re-introduced every year since.
Professional Services Taxes:
The financial advice industry has, unfortunately, become a perceived potential source of revenue for many states that are facing budget shortfalls or may be seeking additional sources of revenue. Just this year, we helped defeat a bill in Connecticut that would have imposed a 19% tax on income from investment management services, and worked with NAIFA to help block an Illinois measure that would have levied a similar 20% tax on partnerships and corporations.
These taxes would have made financial advice more expensive and less accessible to investors who now, more than ever, need access to affordable financial advice and services.