The Financial Service Institute’s (FSI) annual Forum and Capitol Hill Day assembled approximately 200 financial advisors and industry professionals to participate in meetings and informative discussions on May 19-20, culminating with visiting congressional offices on the third day, May 21.
Next Gen Website
On the morning of May 20, Tim Stinson, Chair of the FSI Board of Directors and President of Cetera Advisor Networks, announced the unveiling of financialcareers.org, a job posting and educational website to reach the Next Gen about career opportunities in financial advice. According to Stinson, the site’s target audience includes recent college graduates, students and potential mid-career changers.
Bush Update On Administration, Congress, Tax Reforms, Next Party Leaders And Midterm Elections
Jeff Bush, Principal at The Washington Update, presented an update to attendees on the current political environment, especially regarding financial services.
In his analysis of the Senate, Bush noted that Senate Majority Leader John Thune is “more of an institutionalist type of Republican, not a MAGA type,” which may cause gaps between the Senate’s agenda and that of the Trump administration. He pointed out that with several Republican Senators not always voting with the leadership, the Senate may turn frequently on the tie-breaking vote of Vice President J.D. Vance for those budget and tax bills that are exempt from filibusters.
Turning to the House of Representatives, Bush said that the reason that Speaker Johnson won may be that no other person wanted the job, which is made difficult by the slim majority the Republicans hold.
Bush said the Democrats are leaderless currently, and going through a “grieving process.” He said the tax bill currently before Congress may become a rallying point for the Democrats to get “on the same page.”
He noted that current deregulatory efforts may take some time to come to fruition, possibly until 2026: “In this industry it takes as long to deregulate as it does to regulate.”
Bush said that on the issue of tariffs, the administration favors the “stick” over the “carrot,” and believes tariffs are being used as a negotiation tool. At the same time, there’s a potential for new tariffs to be imposed – secondary tariffs – which he defined as tariffs that the U.S. may place on a country that trades with a country that the U.S. currently tariffs.
Bush analyzed the tax reform situation, saying it was part of the “perfect fiscal policy storm of 2025” that will include not only tax reform, which is pressing because the Tax Cuts and Jobs Act (TCJA) is set to expire in December, but also two budget debates and a debt ceiling debate that must be resolved this year.
According to Bush, 81% of U.S. tax filers will see a tax increase if the TCJA goes away. In that light, he expects that a tax reform bill will be accomplished this year, but not necessarily at the current time, because Senate leadership would prefer to look at tax reform in the fall and concentrate on issues concerning the border, debt, energy and defense in the spring.
Bush predicts that around the year 2035 Congress and the administration will address the increasing debt burden. He believes that mandatory government spending will force the issue, which will not be resolved until an impasse is reached that cannot be ignored by politicians.
Responding to an audience question, Bush stated that he believes Vance will be the leader of the Republican Party going forward. “It’s J.D. Vance’s to lose at this point.”
Analyzing the upcoming midterm elections, Bush doesn’t necessarily think historical patterns of elections going against the party in power will hold this time. Republicans may actually make further gains in the Senate. And if there is no recession or only a mild recession, Republicans may hold the House, though he states, “The House is a wild card.”
Bush also predicted that the next Democratic presidential candidate will be a moderate, populist governor, as the party moves toward a more moderate stance.
FINRA CEO Cook Addresses Paul Atkins, Project 2025, Proposed Business Activities Rule And Fee Rebates
Shortly after the Bush presentation, Dale Brown, President and CEO of FSI, interviewed Robert W. Cook, the President and CEO of FINRA.
Addressing the question of FINRA’s working relationship with the SEC’s recently appointed Chair Paul Atkins, Cook said, “Some of his priorities and direction are exciting to us.” Under Atkins, Cook expects the SEC to modernize and thoughtfully tailor rules, as well as promote innovation, which may “trickle down” to FINRA.
Brown asked Cook about Project 2025, a “policy manifesto that is proving to be a policy blueprint for the new administration,” specifically on its proposal to dissolve FINRA and fold its operations into the SEC.
Cook replied that the history of self-regulatory organizations (SROs) “goes back to the founding fathers.” He stated that there’s many reasons to support the SRO model, including FINRA, such as providing utilities that agencies may not provide – for example, an arbitration system – and financially supporting government agencies without using taxpayer money. He also pointed to the fact that the complicated nature of markets requires the involvement of industry expertise.
Cook explained that the “FINRA Forward” initiatives are about modernizing rules, empowering member compliance and addressing cybersecurity and fraud. The three initiatives are designed so FINRA can help members serve clients, markets and the nation better, he said.
Addressing the proposed rule on outside business activities, Cook said it is intended as an update, and it’s been misunderstood. “It’s streamlining and reducing, not adding. We’re not imposing any new burdens. It doesn’t require disclosures on outside holdings of bitcoin, bank accounts or real estate, and doesn’t affect activities unaffiliated with investment advice.”
On FINRA’s announcement of rebating some fees collected in 2024 to member firms, Cook stated that projected receipts don’t match actual outcomes. If there is sufficient excess, it will return a portion of fees to members, and has done so before.
SEC Commissioner Peirce On AI, SEC Initiatives, ‘Regulation By Enforcement,’ And More
“Our markets are too politicized and we need to take the temperature down a bit,” SEC Commissioner Hester Peirce said in an interview with Brown later the same morning. “As a regulator, we should be leading the effort to take the temperature down.”
The SEC addresses where it can add value and where it doesn’t, according to Peirce. “Every time we take action as an agency,” she said the SEC asks if it’s addressing a problem that private markets can solve on their own. It also asks if there’s something it’s doing as a regulator that is creating a problem that can be removed. These questions are intended to surface efficiencies.
Peirce said that the SEC had perhaps offloaded too much responsibility to FINRA. “We need to keep a pulse on the markets, so shouldn’t give everything to FINRA,” she added, noting that the SEC may have ceded too much responsibility around data, short selling, and the nuts and bolts of regulatory work.
Asked by Brown what the industry can expect from Atkins, Peirce stated that he will be “very different. Atkins has a lot of experience. He’s familiar with lots of issues before us, such as market structure. Also, capital formation is back on the agenda: Why are there not as many companies going public?”
She added that the SEC under Atkins is going to look at the consolidated audit trail and executive compensation disclosure.
Brown raised the issue of “regulation by enforcement,” which he likened to “using enforcement powers to change the rules in the middle of the game.”
Peirce stated that she shares his concern. As an example, she pointed to enforcement action around communication of advisors with clients that was not captured in firms’ systems. Rather than the enforcement action that the SEC took, she said a better way would have been to review the rules and means of communication in light of how communications evolved after COVID. Using enforcement “didn’t help people figure out the right solution. Firms that had done a lot right still got caught up.”
Addressing the restrictions on persons who are not “accredited investors” according to SEC rules, Peirce said that she would like to see the elimination of the accredited investor standard. “The SEC should not do things as a regulator that make it impossible to serve people who don’t have a lot of money.”
“Regulation right out of the box isn’t necessarily the right answer” for AI, according to Peirce. She said the right approach is to understand the problems, think about them and then find the right solutions. Firms can be “hamstrung” if there are too many regulations on AI, she pointed out, though there are real issues including scams. Peirce also said she believes that the consolidated audit trail has gone too far and that the SEC must “put a governor” on itself when using AI.
Julius Buchanan, Editor in Chief at Wealth Solutions Report, can be reached at julius.buchanan@wealthsolutionsreport.com.
