What's Next in this Regulatory Dominated Environment

The Securities Industry Financial Markets Association, which is better known as SIFMA, held a conference in New York this week to explore among other things, the future of the financial sector in an environment dominated by regulation stemming from the one-year-old Dodd-Frank bill.

Over 300 new rules and regulations are contained within that legislation and so far only about one fifth have been implemented. Deadlines for others have been missed or pushed back.

Even while the conference was going on, the Financial Stability Oversight Council, affectionately known as "F-SOC," announced that it would miss a next-Monday deadline in determining which large firms could pose a risk to the financial system.

F-SOC is just one of many new federal bodies created by Dodd-Frank to regulate the massive overhaul of our financial system. This one is actually headed by Treasury Secretary Geithner and it was given the task of designating which firms qualify as being systemically important financial institutions, or "SIFI's" who would then be required to hold additional capital and be subjected to heightened regulatory scrutiny.

The council reportedly had been under some pressure lately to offer more clarity around how it plans to determine whether a firm is a "SIFI" or not. It now looks like it will be several more weeks before that's going to happen, according to people close to the conversation.

As for the overall impact of Dodd-Frank one year after it became law, the outlook appears to be cloudy at best, and depending on who you talk to, "better" for some and "painful" for others.

Treasury Assistant Secretary for Financial Markets Mary Miller praised the bill saying it will protect the economy in the future despite any challenges it's faced in its first year of existence. And she warned that "scaling back or repealing major parts of the Dodd-Frank Act or not providing regulators with the funds they need to implement the Act will leave our economy exposed to a cycle of collapses and crises."

On the other side of the argument, former Reagan economist and CNBC host Larry Kudlow called it "a terrible bill." He said he's worried that all the new regulation will stymie economic growth. "We're not creating any jobs," said Kudlow. "There is a capital strike going on in this country in which American companies are sitting on $2 trillion in cash and they don't want to spend it because they don't know how they're going to be penalized in the next five years."

Dodd Frank is also prompting a change in the way wealth managers do business. Charles Johnston, vice chairman of Morgan Stanley Smith Barney, told the conference that financial advisors are switching over to a fee-based advisory model because of the law's mandate to the SEC to create a universal fiduciary standard for retail investment advice.

John Taft, chief executive of RBC Wealth Management (U.S.) and chairman of the SIFMA board noted that one major drawback is that small investors who can't afford adviser fees will be harmed. He mentioned industry statistics showing the cost of advice could double for those with a modest amount of money invested, such as holders of individual retirement accounts.