Top RIA Compliance News Articles for the Week of December 1, 2017

1. How Planning Software Can Reduce Regulatory Risk (Author- Kenneth Corbin, Financial-Planning.com)

Navigating the ins and outs of Securities and Exchange Commission (“SEC”) regulations can be challenging, but a number of RIA technology solutions can play a role in helping an RIA firm manage its compliance requirements. Lisa Graham of eMoney, a leading financial planning software solution, states utilizing financial planning software, “demonstrates that the advisor is really taking into consideration the client’s full financial picture, not just the rollover that they’re asking about”. Josh Pace, CEO of Trust Company of America, also shares, “if you’ve got that home-grown Excel spreadsheet, that’s not going to get you as many points as a recognized planning tool.”

2. Advisers Face Perils When Firms Tell Them to Ignore the DOL Fiduciary Rule (Author- Ron Rhoades)

In his travels, Rhoades has reported seeing, “broker-dealer and dual registrant firms that have, apparently, told their own advisers to ‘not worry’ about the U.S. Department of Labor’s “Conflict of Interest” (Fiduciary) Rules (and the related prohibited transaction exemptions, such as the Best Interests Contract Exemption),”. Rhoades insists that this is a grave mistake, pointing out that parts of the rule are indeed in effect, and that the delay is temporary. He makes note of the complicated impartial conduct standards, and rules applying to rollovers to IRA accounts. He sums up by stating that in some situations, an advisor’s duty is to the client first, and their firm second. 

3. Level Fee Trend Survives Fiduciary Rule Delays (Author- Robert Bloink/William Byrnes, ThinkAdvisor)

Though portions of the DOL rule are delayed, it has already had lasting effects. Some firms are acting pre-emptively by eliminating “commission-based compensation for financial advisors who act in a fiduciary capacity in providing advice related to 401(k) accounts”. According to Bloink and Byrnes, this means level fee compensation is the new normal. Since one of the pieces of the DOL rule that already applies is to “receive only reasonable compensation”, this makes sense, lowering the risk of potential issue.

4. Broker Protocol Is Good For Firms and Clients, Study Finds (Author- Jeff Benjamin, InvestmentNews)

The University of Kentucky has conducted a recent study in support of the broker protocol. Though the study was conducted before Morgan Stanley made its announcement that it was leaving the broker protocol, it is especially relevant now. In particular, William Gerken, a finance professor at the University of Kentucky, argues, “when the employee owns the assets he takes better care of it.” He adds, “in the context of financial advice, the most valuable asset is the client relationship.”

5. SIFMA, Others to Regulators: No New Cybersecurity Rules Needed (Author – Ed Silverstein, ThinkAdvisor)

Ed Silverstein argues no new regulations are needed because satisfactory ones are already on the books. Not only are they not necessary, a former SEC lawyer says, but they are expensive. Not everyone agrees, especially after Equifax, but others state that the current rules are already complicated, and often overlap, causing problems for small businesses. For example, “there are 11 federal agencies that make some form of cybersecurity requirements,” Silverstein writes. This is bound to create redundancies, and even conflicts, and this is not even including state regulations. 

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, UBS leaving the protocol for broker recruiting, and protecting the elderly from financial fraud. Be sure to check back next Friday for next week’s top articles!