The latest call for brokers to accept pending regulatory reform comes from a surprising source — one of the industry's top executives.
Bank of America wealth management chief Sallie Krawcheck said on Thursday that financial advisers should not oppose a looming regulatory overhaul of the U.S. securities industry but instead embrace coming change, saying it is good for customers.
Krawcheck, speaking at an industry conference, said change was necessary, and understandable, after a turbulent 2008 that saw investors across the globe lose trillions at the height of a financial crisis that caught many brokers by surprise.
"Our regulators are upset with us, the public is irate with us and clients are angry with us," said Krawcheck at the Securities Industry and Financial Markets Association's private client conference in New York.
Krawcheck's remarks are her strongest critique of the industry and its resistance so far to regulatory change, and remarkable coming from one of Wall Street's most powerful executives.
She oversees roughly 16,000 Merrill Lynch advisers as well as private bank U.S. Trust after taking the job as Bank of America's head of global wealth and investment management last August.
Krawcheck's speech came the same day U.S. President Barack Obama visited New York, speaking to a group of the city's financial executives about the need for stronger regulatory reform.
The wealth management industry, she said, should not seek refuge in blaming traders or complex financial instruments that she called "cartoon villains," and instead accept responsibility for the woes of clients during the last two years.
"I've taken multiple trips to Washington, D.C., on this issue, and every trip makes it clear that reform is inevitable," she said.
Krawcheck said advisers shouldn't shy away from such a discussion.
"It makes little sense to fight it when it's in the client's best interests," she said.
Under various proposals currently under debate in the U.S. Congress, the industry would move to a single standard that requires advisers to act as a fiduciary for their clients—or always in their best interests.
Under the current framework, some advisers operate only under a so-called "suitability" standard that only requires advisers to provide advice that fits the broadly defined needs of a client, but may not necessarily be the best option.
Critics have argued the two-standard system creates conflicts of interest, and is not a level, fair playing field for investors.
Krawcheck said advisers must embrace the idea that a single industrywide standard is coming.
She said if the industry does not take a hard look at its practices and policies in the years leading up to the crisis—letting a recovering stock market and healthier investor portfolios ease investor outrage—it is a "pretty risky bet that ignores the real elephant in the room."
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