Remarks at the Inaugural Meeting of the Asset Management Advisory Committee

I am delighted to welcome you in this new year to the inaugural meeting of the Commission’s newest advisory committee—the Asset Management Advisory Committee, or the “AMAC.”[1] I apologize that I am not there to speak to you in person. I am in Europe for meetings with my international counterparts on matters that relate directly to the evolution and globalization of the asset management industry, including (1) whether there is a mismatch in investor expectations and market realities regarding liquidity depth in various equity, fixed income and alternative asset markets, and (2) issues raised by the reference rate transition and the discontinuation of LIBOR.

I am pleased, however, that my fellow Commissioners are joining you this morning. I thank them for their support of the AMAC. I believe we have all benefited from the insight, perspective, and experience that advisory committees have brought to the Commission in recent years.

I would like to thank all of the Committee members for your willingness to serve. I recognize that all of you have significant demands on your schedules. A special thanks to Committee Chairman Ed Bernard who has already undertaken significant work on behalf of the Committee.

I would also like to thank Dalia Blass and her team in the Division of Investment Management, as well as the Office of General Counsel, for conceiving of, and then helping to form, the AMAC. Ideas are one thing, execution is another, and I know bringing this experienced and thoughtful group together was no small task.

It is incumbent upon the Commission to hear from those with experience and expertise from outside this building. The AMAC was established to do just that—to provide informed, diverse perspectives and related advice and recommendations, which will inform the Commission’s policy decisions. More specifically, I believe the AMAC will help ensure that our regulatory approach to asset management meets the needs of retail investors and market participants at a time when the asset management industry and our markets more generally are rapidly evolving.

I think it is instructive to look at some numbers. There are approximately 13,000 registered investment advisers with $83 trillion in assets under management. Over 8,000 of these advisers provide services to retail investors, which represents approximately $41 trillion in assets under management and 40 million client accounts. As of the end of 2018, over 100 million individuals representing nearly 57 million households, or 45% of U.S. households, owned some form of fund product. And about half of all households owning mutual funds have moderate or lower incomes.

While these numbers are insightful, the reason retail investors are investing is in some ways even more profound. According to a recent study of mutual fund investors, 93% are saving for retirement, 46% are saving for emergencies, and 24% are saving for education. To be sure, asset managers have a host of important, long-term obligations.

These numbers make clear that, on a macroeconomic level, Main Street investors are a primary driving force of, not just the asset management industry, but the broader capital markets. And, on a microeconomic and far more personal level, the ability for these investors to access our markets on fair terms is central to their ability to meet their long-term financial needs. That tens of millions of Main Street investors entrust their hard-earned money to the capital markets—and in particular to fund complexes and other investment professionals—is a stark reminder of why the issues you will address are so important. Indeed, this is why we have focused a significant part our regulatory agenda on advancing policies designed to promote access and choice for Main Street investors, including more recently focusing on ways to increase access to the private markets, while at all times ensuring appropriate investor protections. I am happy to see that the Committee is going to begin its own discussion of this topic today, and I applaud the Commission’s staff, including the Division of Investment Management, for their significant efforts to improve the investor experience to date.[2]

I am hopeful that the Committee will focus on this perspective—promoting access and choice for our long-term, Main Street investors, while ensuring appropriate investor protections. As you provide your advice and recommendations, I also ask that you be candid. Tell us where we can improve our markets and our regulations. Strive to identify ways we can promote efficiency, capital formation and investor protection. History shows that this is not a zero-sum game and viewing it as such is unnecessarily limiting and, frankly, can lead to suboptimal policy decisions. Markets today provide more investor protection, are more efficient and provide more investor choice than they did thirty years ago. My hope and focus is that, a decade from now, our capital markets will provide more investor protection, be more efficient and provide more opportunities for our Main Street investors than they do today.

I also am very pleased that this Committee will be focusing its efforts on ways to promote diversity and inclusion in the asset management industry. For the same reasons that hearing the diverse perspectives of the members is critical to the success of this Committee, it is critical that the asset management industry include women and men with diverse backgrounds and perspectives. Again, this is an industry that provides important financial services for all members of our society. It also is an industry where familiarity with investing and investors is at least as important to access as education about the industry. Said more directly, opportunities to participate in the investment management industry are distributed much more narrowly than they should be. As you may know, the Commission recently announced the appointment of Robert Marchman as Senior Policy Advisor on Diversity and Inclusion to help develop and implement strategies to promote diversity and inclusion, both within the Commission and through external engagement with agency partners and market participants. I encourage the Committee to engage with Mr. Marchman, Pam Gibbs, the Director of our Office of Minority and Women Inclusion and me in this area.

I will close by saying that I also look forward to continuing to work with my fellow Commissioners to ensure that our regulatory approach to the markets is sound and continues to meet the needs of Main Street investors as well as other market participants.

Thank you.