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The new zeitgeist: Regulation, regulation and more regulation

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WASHINGTON — One issue is on the minds of the industry's top executives gathered at SIFMA's annual conference.

"I've been here all day and what have I heard all day? Regulation, regulation and regulation. Who have been the guest speakers? Regulators," Stifel CEO Ronald Kruszewski said during a panel on Wednesday.

Though attendees laughed, Kruszewski's partial jest struck a chord with an industry navigating a more intense regulatory landscape.

And the focus of many conversations: The Department of Labor's fiduciary rule, mentioned at nearly every panel at the conference, which included keynote speakers SEC Chairwoman Mary Jo White and Timothy Massad, chairman of the Commodity Futures Trading Commission.

The fiduciary rule is not only upending how compliance departments operate; it's left some advisers wondering how they'll thrive in a post-fiduciary world. Nearly one in five advisers are reconsidering their careers, according to a recent Fidelity study.

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Several executives privately expressed skepticism that many advisers could be that doubtful about their future in the business; some may be just nearing retirement, one wealth management leader suggested. But they all agreed the rule requires a paradigm shift in terms of how the business is structured, and firms are gearing up for the challenge.

James Kerr, CEO of D.A. Davidson Companies, told attendees that the Labor Department regulation was a "seismic shift" for the industry.

"That is what it comes down to: If you are going to get paid in this business, you have to find ways to add value," James Kerr, CEO of D.A. Davidson Companies, said.

The challenge for firms, Kerr said, is to ensure that their advisers have the support to make the transition, particularly those who are reluctant to change and perhaps unable to do so on their own.

"At our firm there's maybe 10% that fit into that category. We're going to do one-on-one coaching to help those advisers," Kerr said, adding that the Great Falls, Montana-based brokerage firm would be rolling out training for all of its roughly 400 advisers.

In the independent channel, the hurdles individual advisers face can be widely different, says Valerie Brown, executive chairman of Advisor Group, which includes four independent broker-dealers comprised of more than 5,000 advisers, according to the firm's website. Each of those advisers is unique, she said.

"In the independent space when you've met one financial adviser to talk about their practice, you've only met one," Brown told attendees.

Several executives anticipated that the rule might spur the creation of new products and services, they told attendees.

Kerr said that the rule reinforces a basic principle for the business.

"I've seen the whole transition, from the business being based on transactions and performance to your family life coach. That is what it comes down to: If you are going to get paid in this business, you have to find ways to add value," he said.

Brown said her firm would continue to offer fee-based and commission-based products, but added: "Our challenge is to provide fee-based products that work for small clients."

Brown also said that advisers are busy workers in normal times, and they need a helping hand to navigate the new rule, whether that is additional training or new technology. Pointing to the 18% of respondents who said they are reconsidering their careers, she expressed sympathy: "When something like this unfolds, they think 'Man I do not have time for this.'"

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