Each week we’re giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser (“RIA”) compliance and regulatory issues. This week’s recap focuses on new Securities and Exchange Commission (“SEC”) cybersecurity guidance, preparing for the new Form ADV Changes and the trend of advisors using text messages as a preferred form of communication with clients. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of August 12, 2017:
- Why Your Firm May Not Be as Safe as it Could Be (Author- Kenneth Corbin, Financial Planning)
Financial Planning’s Kenneth Corbin composed this article on the importance of an advisor firm’s cybersecurity practices and the practices put in place today may not be enough in the eyes of regulators. President of RIA in a Box, GJ King, says, “we do feel it’s only a matter of a time before we begin to see a new round of enforcement actions related to cyber security. Arguably, cyber security poses the single greatest risk to all clients of all RIA firms.” Corbin reports there are two areas firms can focus on for improvement on their cybersecurity practices. Details on the key takeaways firms should consider can be found in this article.
- Advisers Get More Breathing Room to Make Form ADV Changes (Author- Mark Schoeff Jr., Investment News)
Investment News’ Mark Schoeff Jr. reports, “Advisers who make changes on their Form ADV after Oct. 1 won’t have to provide the new information about regulatory assets under management, separately managed accounts and wrap-fee programs until they file their annual ADV amendment next year.” Although there is some breathing room with the new rule going into place October 1st, GJ King, president of RIA in a Box states “it impacts some of the changes but not all of the changes. The rule itself has not changed. The vast majority `of firms` are going to need to have the information available shortly.” The new Form ADV changes require firms to provide additional information in the following areas including “regulatory assets under management attributable to various client types, they also must indicate whether they use an outsourced chief compliance officer, disclose firm social media pages and give details about their 25 largest branch offices.”
- Interesting Angles on the DOL’s Fiduciary Rule #58 (Author- Fred Reish, Fredreish.com)
Fred Reish, one of our top 5 DOL fiduciary rule experts to follow, published his 58th article about his observations on the DOL fiduciary rule. In this latest post, Reish discusses how in a previous blog post, he reported on “the Department of Labor’s (“DOL”) position that recommendations of contributions to plans and IRAs were fiduciary advice.” A week after this was posted, the DOL changed its position on the topic. Reish informs the DOL decided those recommendations will not be fiduciary advice. The new DOL guidance is found in the DOL’s “Conflict of Interest FAQs (408b-2 Disclosure Transition Period, Recommendations to Increase Contributions and Plan Participation).” Check out Reish’s article to read about the latest guidance provided by DOL staff.
- Advisers Turning to Text Messages to Communicate With Clients (Author-Liz Skinner, InvestmentNews)
Investment News’ Liz Skinner reports, “financial advisers over the past 12 months have been giving text messaging a fresh look as a method of communicating with clients, in part because email has become a much less effective way to connect.” Mark Gilbert, chief technology officer at Hearsay Systems states, “advisers are recognizing that response rates are much higher and response times are much lower using text messaging compared to emails.” Many firms currently don’t allow their advisers to communicate via text message due to regulatory concerns. According to the article, “Mr. Gilbert expects advice firms using texts – which he pegs at about 10% or less of all advisers – will probably double over the next year.”
- When Independence Makes More Economic Sense (Author- Mindy Diamond, Wealth Management)
Mindy Diamond brings us this Wealth Management article on why interest in going independent and starting your own RIA firm has increased and is believed to make more economic sense. She reports, “independent broker/dealers, RIA and hybrid RIAs saw a jump in market share from about 37 percent in 2011 to 41 percent in 2016.” Diamond uses a hypothetical example in her article of an advisor and compares the economics of going independent as opposed to the present value of taking a check from a wirehouse or other major brokerage firm.
Don’t forget to check out last week’s top RIA compliance news articles on new Form ADV changes and an uptick in volume of SEC audits. Be sure to check back next Friday for next week’s top articles!