I think the Financial Services Institute–the trade organization of independent broker-dealers and annuity (and non-traded REIT) sales organizations–might be the smartest lobbying group there is. They've borrowed some tactics from that lizard that flares out huge membranes on either side of it to make it look much bigger than it is when confronting predators. But the FSI has taken the tactic to a whole new level.
This expression of admiration was triggered by yet another FSI press release, telling us that Girard Securities has signed up 250 affiliated representatives for FSI membership. This, the release tells us, brings FSI "membership" to over 35,000 fee plus commission advisor members. In actual fact, the FSI membership consists of just over 100 broker-dealers, whose interests the organization lobbies for. But when those broker-dealers sign up their members, generally without consulting them first, FSI membership looks like it's 350 times larger than it actually is, and makes it seem like it represents the interests of advisor professionals rather than the companies who form the much smaller body of the lizard.
When the Financial Planning Association or the National Association of Personal Financial Advisors go before Congress to testify about the interests of their members, they represent people who actually, affirmatively decided to join these organizations, and paid membership dues out of their own pockets. Not so, FSI, whose 35,000 members were signed up wholesale by their broker-dealers, and whose membership dues are paid for by the broker-dealer. Leaving the lizard analogy aside, this is like IBM, Microsoft, Apple and Oracle deciding to make all of their employees members of the Tech Association (lobbying motto: "Don't Tax Tech Companies"), and then telling regulators and lawmakers that this lobbying issue is crucial to the lives of all those people who had no inclination to sign up on their own.
The bottom line here is that FSI has totally outsmarted the staffers and representatives on Capitol Hill with this clever ploy. Its just-over-100 members, who have taken a firm stand against a strict fiduciary standard and in favor of letting reps get commissions for sales to IRA accounts, somehow get the same attention as organizations who, in reality, have far more members who affirmatively joined their ranks. The FSI has also managed to outsmart the regulators, particularly the SEC, whose staffers seem to believe that if 100 broker-dealers think a strict fiduciary standard is a bad idea, so, too, must the advisors whose names have been keystroked into the FSI membership rolls.
This is such a clever idea that I suspect other industries will eventually adopt it. Instead of contributing lobbying money to their trade organization, electric utilities can donate the same dollars and sign up their thousands of employees, and then announce a groundswell of membership support for deregulation of electricity prices.
Construction companies can divert lobbying money to, instead, signing up their carpenters and bricklayers and roofers, and then use the much larger footprint to argue before Congress that many thousands of workers at construction sites all over America have a passionate interest in tax breaks for the builders of new residential housing. What industry wouldn't like to outwit Congress into thinking they represent far more constituents than they really do?
Meanwhile, I find myself wondering if there's any way NAPFA, the AICPA and the FPA can counter their rival's sly lobbying tactics to promote a fiduciary standard that would protect the public from unscrupulous sales activities. What can they learn from the lizard with the membranes?
I can see only one possibility. The organizations could create a category of membership where each advisory firm can sign all of its clients up–plus relatives of those clients, and any friends or relations they happen to have in their database. They can download all these names, and the real financial planner professional organizations can then announce their tens of thousands of new "members" in press releases, and fool our representatives in Congress into thinking that they're much larger than the National Rifle Association or the U.S. Chamber of Commerce.
All they have to do to match the FSI's lobbying tactics is give up a large chunk of their honesty and integrity, both of which which seem to put one at a grave disadvantage when you're lobbying the SEC or Congress.