Top RIA Compliance News Articles for the Week of September 28, 2018

1. RIA Breakaways Rose 20% in 2017: Schwab (Author- Bernice Napach, ThinkAdvisor)

According to a new report from Charles Schwab, “advisors choosing to break away from their broker-dealer and IBD firms to set up their own shops grew 20% in 2017.” Based on data from the SEC, the analysis shows, “new RIA registrations reached 238 in 2017, up from 1999 the previous year and capping a 59% jump since 2013.” Additional statistics reported by Bernice Napach from the recent Schwab report include, “30% of new independent RIAs managed assets of $300 million or more, up from 25% in 2016 and more than double the 12% in 2013. The average AUM for new RIA firms in 2017 was $352 million, up 28% from the average in 2016, and the total combined AUM of the 238 firms was $84 billion.”

2. Heightened supervision works (when it’s used) (Author- Jessica Mathews, FinancialPlanning)

As reported by Jessica Mathews, “in recent weeks, the SEC has charged an ex-Wells Fargo advisor for allegedly stealing from elderly clients suffering from Alzheimer’s and a broker who allegedly convinced investment students to fund his unprofitable franchise, among other settlements.” Mathews goes on to say, “to prevent such occurrences, state regulators, or firms themselves, place advisors that could be at risk of harming clients on heightened regulation programs.” Click here to read about heightened supervision success rates.

3. FPA splits with CFP Board over state regulation of financial planners (Author- Mark Schoeff Jr., InvestmentNews)

As reported by Mark Schoeff, “earlier this week, the Certified Financial Planner “CFP” Board of Standards Inc. announced it opposes state oversight of the planning process, asserting it would potentially create regulations that vary from state to state and increase compliance costs for planners.” Schoeff continues on to write, “Lauren Schadle, FPA executive  director and chief executive, sent a message to FPA chapter leaders saying the CFP Board is misguided in supporting only federal regulation.” Ms Schadle also wrote in her letter, “locking FPA into a strategy in a volatile landscape does not adequately support our members or the profession now or in the future, since the professional landscape is always shifting and will continue to do so in the future.” To read more about the differing opinions over state regulation of financial planners, click here.

4. People Have a False Sense of Cybersecurity: Study (Author- Marlene Satter, ThinkAdvisor)

As reported by Marlene Satter, according to a 2018 Chubb Cyber Risk Survey, “individuals aren’t ready to cope with attacks on their own or their families’ data. And a whopping 86% are clueless not only about what to do, but about how vulnerable their data is, in case of cyber threats.” The survey also notes that 80% of respondents are most worried about a “drained bank account,” but that actually isn’t the biggest risk people face. Per Chubb, “stolen social security numbers can cause untold damage, but so can compromised medical records, which could actually kill you – think unrecorded allergies, exhausted insurance limits for care you never received, or the wrong blood type in your file.” 

5. The SEC Doubles Down On Examining Advisor Rollover Fees (Author – Tracey Longo, Financial Advisor Magazine)

As reported by Tracey Longo, “the Securities and Exchange Commission is looking more closely at your IRA rollovers experts warn. Examiners will not only be sifting through rollovers from retirement plans but from other IRAs, annuities and commissionable products.” Long further states, “If you fail to justify your recommendations and fees for rollovers, you may trigger an SEC examination.” Colleen Bell, chief fiduciary service officer at Cambridge Investment Research uncovers a few items the SEC is actually looking at, including, “at reasonableness of fees. If they’re above 1 percent, you can push back and say it is reasonable, but you will have to justify that.” Bell also added, “it is unclear whether the SEC will differentiate between financial planning and asset management fees when looking at the all-in bill to investors.”

Don’t forget to check out last week’s top RIA compliance news articles on the proposed cybersecurity model rule from NASAA, a review of President Trump’s deregulatory push, and the SEC’s proposed Regulation Best Interest. Be sure to check back next Friday for next week’s top articles!