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ADISA Head Discusses DOL Fiduciary Rule, State of the Industry

The DI Wire sat down with ADISA’s chief executive officer and executive director, John Harrison, for a one-on-one interview to discuss the alternative investment space, the Department of Labor’s proposed fiduciary rule, and the association’s upcoming 2015 annual conference to be held on October 12-14 at The Cosmopolitan of Las Vegas.

In July, Harrison visited Capitol Hill to educate members of Congress and to advocate on behalf of Section 1031 exchanges, and in August, the association’s legislative and regulatory committee chair, John Grady, testified before the Department of Labor regarding their fiduciary rule proposal.

THE DI WIRE: We have seen a lot of activity from advocates of protecting Internal Revenue Code Section 1031 exchanges recently, and noticed ADISA’s work on Capitol Hill earlier this summer. How do you think advocacy efforts are faring? What sort of feedback have you heard from industry representatives and congressional staff?

HARRISON: Well, industry representatives are hopeful on the 1031 issue, but remember we’re paid to be thus, so what’s more important is the congressional opinion. From the congressional staff and Members of Congress I have talked to—on both sides of the aisle—they are impressed by the economic power of the 1031. I would say that without the latest industry efforts, there would not have been a lot known about it. We co-sponsored two landmark studies on the effects of 1031s. Everyone I’ve talked to now sees the value. One staffer told me the other day that now is certainly a good time—when there’s no crisis about the issue—to go around Congress and talk it up. It definitely won’t be dismissed out of hand, and my prediction is that it will be preserved in any upcoming tax reform discussions ultimately.

THE DI WIRE: There has been talk of an expected decline in equity raise surrounding alternative investments. Where do you see the market headed? Is there any reason for the change?

HARRISON: What did the late Yogi Beara say, “it’s tough to make predictions, especially about the future.” No market predictions from me; I would have predicted that the Feds would have raised interest rates at the last meeting, but who knows where that’s going? Alternatives as a whole are doing fine; the last estimates I saw from McKinsey showed an increase in the average percent of total portfolio AUM dedicated to alternatives. What you may be asking about is the various types of alternatives: most are up, some are down, many are cyclical; I’d say that BDCs seem to be doing quite well from what we see presented at our conferences.

THE DI WIRE: ADISA’s legislative and regulatory committee recently requested comments from its members on the fiduciary rule proposal by the Department of Labor. Are there any interesting takes on the proposal you can share with our readers?

HARRISON: I wish I could be optimistic about the fiduciary rule, but at present it is a very uphill battle. ADISA is part of the inner sanctum of the SIFMA-led coalition to fight this, and we are doing our best. At present, we are helping fund advertising efforts aimed at certain political target markets; we have sifted through document after document on research about this, and our L & R committee chair appeared before the Department of Labor. Frankly, the administration holds almost all of the cards on a regulatory issue, and the only major things left open to us are [congressional] defunding and eventually the courts.

One thing I did hear recently in Washington is that some of the supporting associations were actually asked to write letters of support for the rule by some in the government. They did not do so of their own initiative. I had wondered why some of the support comment letters were so weak. That’s rather telling, isn’t it? No one I’ve talked to is an adamant supporter of the rule—not even the DOL staffers, but don’t ask for any names. It seems a result of going through the motions just because they can.

THE DI WIRE: Your annual conference is going to be held this October in Las Vegas. What can you tell us about the event? Anything new and exciting our readers can expect?

HARRISON: I’m proud of two things particularly as we go into our annual conference: one, we have a ratio approaching one to one on suppliers and customers – that is, about one BD, RIA, or [registered] rep. present for each of the sponsors and affiliates. This is almost unheard of in any industry. And two, over 20 percent of our sessions are instructional—that is, workshop, lecture, interactive town halls, and so forth. We do so much more than just the usual panel approach. Our volunteer leadership and program chair have really gotten behind this effort, and as a former university official, this is exciting to me. Obviously, it’s great for the broker-dealers, reps and advisors, for they are the ones whose numbers keep growing.

THE DI WIRE: Is there anything else that you would like to add about what’s going on in the alternative and direct investment industry?

HARRISON: Our events, our organization, and our membership are all growing. In fact, we have doubled in membership in the past three years from over 2,000 to over 4,000. Something’s going right with alternatives, and we’re glad to be in the mix!

The Alternative & Direct Investment Securities Association is the largest trade association serving alternative investment and securities industry professionals who are active in offering, managing and distributing private and public direct investments. ADISA connects members directly to key industry experts through intimate forums and leading edge conferences and trade shows providing timely trends and education. The association was founded in 2003 and has more than 4,000 members.