ADISA recently submitted a comment letter on the SEC’s proposed Regulation Best Interest Rule – what are the organization’s primary concerns with the proposed rule?
First, as always, ADISA believes in appropriate regulation of the financial services space with the overriding goal that the cost imposed by a new regulation is well exceeded by its benefit. We had some relatively minor requests of the SEC in our letter, and it’s important to note that our letter was crafted using our BDAC (broker-dealer advisory council) as a focus group. We sought to get real, more hands-on advice to pass on to the SEC. The full letter can be read here, but in summary:
1. RBI should require that a financial professional have a reasonable basis to believe that a series of recommended transactions is not excessive when taken together in light of the retail customer’s investment profile.
2. The RBI should look at the practical effects of the disclosure requirements when the word advisor (or adviser) is used in titles for financial professionals. How are the brokerage/commission-based hats going to switch back and forth for some financial professionals—it could get pretty cumbersome and complicated.
3. The SEC should align the definition of a retail customer to FINRA’s definition of a retail investor by indicating that their use of the word “person” does not include institutional investors.
Speaking of regulatory, what topics can attendees expect on the agenda at the annual conference?
We have the whole gamut, and clearly tax reform issues play a big role. The conference might even feature late-breaking developments regarding further rules on opportunity zones that could come out right before the meeting. The opportunity zone funds will be a continued treatment for ADISA from our presentations on the topic this past summer. We will explore that at all levels—at least what’s currently known and offered. The conference also includes several sessions on other tax opportunities as well as FINRA and other regulators giving reports and answering questions. My commitment is that all attendees will get more than their fill of regulatory updates and information.
What types of funds and asset classes are hottest in the alternative investment industry? Can we expect to see these discussed in Las Vegas?
Topping the list is exploration of the opportunity zone opportunities. We’re also expecting environmental/social/governance (ESG) types of private funds, crowdsourcing, automation components for the back office, and we even have a session devoted to new product investigation which seeks to examine new things for our space.
What types of changes have you already witnessed as a result of the new tax code going into effect?
First, the IRS is working overtime to come up with rules of implementation—Section 199A issues are important and ADISA is working with the Treasury Department on how rules around 199A vs. 1031 will shake out. Speaking of 1031, we feel like the industry and the nation really owe a huge debt to our legislative and regulatory committee members and all of our volunteer attorneys who helped defend and promote 1031s—especially important in that was the academic study, which ADISA was part of, that showed how essential 1031s are to the economy.
We’re in a digital age – how important do you value, and think your members value, face-to-face connections for due diligence and networking in the alternative investment industry?
As we progress further into the digital age, it will be fascinating to see how that pans out. My suspicion is that the face-to-face connections will grow as the essence of the distribution chain of advanced product to the high net worth group, and potentially expand some to the lower margins of the high net worth group, but that the commoditization of advice—robo-advice—will not have a dramatic effect on our space. Our members will adopt the attractiveness of dashboard and graphical interaction features and live voice video features to reach even more clientele. Still, the B2B interactions will remain mostly face to face.
With Earvin “Magic” Johnson as the keynote speaker for this year’s conference, what do you expect attendees will gain from an entrepreneur like Magic?
Magic has a great story to tell; his personal company is worth almost a billion dollars, and he is a master at constructing deals in a variety of settings. We’re talking about a guy who translated acumen on the basketball court into success in the business world. Granted he had a great launching pad in his personal brand, but he took it to an outstanding level. I’m psyched to hear from him and know he’ll inspire us all.
How many industry professionals do you expect to attend the event? Which asset classes and roles do attendees typically represent?
We are still tracking record pace as of a day or two ago, and that should bring us in at a few over 1,000 professionals from our space. If we are at our usual proportions, we’ll have slightly under half from the BD/RIA/FO and advisor/rep space and slightly over half from the issuer and supplier space. Many sponsoring companies are involved in various investment products, so giving an asset class breakdown in the aggregate would be difficult. However, I can say that most every asset class is represented that is involved in retail alternatives and then some. Additionally, we always have new folks and funds coming in to check us out. We are excitedly anticipating another great ADISA meeting.