Top RIA Compliance News Articles for the Week of December 24, 2016

1. My Financial Services Regulation Wish List for the Trump Administration (Author- Ron A. Rhoades, JD, CFP, Scholarly Financial Planner)

Ron A. Rhoades, one of our top 5 DOL fiduciary rule experts to follow, serves as an Assistant Professor of Finance and director of the financial planning program at Western Kentucky University’s Gordon Ford College of Business. His blog is a must read for industry professionals and in this most recent post he outlines his “wish list” for financial regulation under President-elect Donald Trump. His wish lists includes keeping the DOL fiduciary rule intact, altering how the Securities and Exchange Commission (“SEC”) enforces the Advisers Act, and reducing overall industry regulation. Looking to further push a fiduciary standard, Rhoades opines, there should be “no more wearing of two hats. No ability to switch hats. Once you are a fiduciary to a client, your status as a fiduciary continues, and it extends to all aspects of the adviser-client relationship.” Rhoades also argues that the SEC should “increase the number of RIA exams for verification of assets (i.e., custody); but decrease substantially the number of RIA exams for everything else.”

2. The Untethered Advisor (Author- Diana Britton, Wealth Management)

Diana Britton profiles, Richard Archer, founder and president of Archer Investment Management, that “has clients all over the world: China, England, California, Colorado, Illinois, Indiana and Tennessee.” By leveraging technology, Archer and a growing number of advisory firms are creating successful virtual practices. Based on a recently study conducted here at RIA in a Box, there was a 21% increase in the number of registered investment advisers (RIAs) who registered in states they do not have a physical presence in. Video conferencing is becoming more popular and allows advisors to have a virtual face-to-face meeting no matter where they are located. Britton writes that evolving technology that enables more methods to connect with clients seems to have more benefits than downfalls, especially when it comes to finding new business.

3. Interesting Angles on the DOL’s Fiduciary Rule #32 (Author- Fred Reish, FredReish.com)

In this week’s “Interesting Angles on the DOL’s Fiduciary Rule” article by Fred Reish, he discusses what the term “Level Fee Fiduciary” means for rollover advice. This article also references some discussions from his #30 article when discussing “BICE-lite”. Reish includes a definition of what a “Level Fee Fiduciary” is as stated in the Best Interest Contract Exemption (“BICE”).  He further investigates key words in the definition as well as how the preamble is worded and ultimately concludes, “for the belt-and-suspenders crowd—the very conservative advisers, the ultra-safe answer is to avoid all other payments or benefits. On the other hand, for those advisers who are willing to rely on a reasonable interpretation (or, in other words, to use a belt without suspenders), a possible approach is, in the case where additional payments are received, to offset those additional payments on a dollar-for-dollar basis (or to pay them over into the IRA).”

4. Bills to Expand Accredited-Investor Pool, Reform Retirement Savings, Protect Seniors Poised to Return in 2017 (Author- Mark Schoeff Jr., Investment News)
   

Mark Schoeff Jr. reports that the House and Senate recently wrapped up a lame-duck session without confirming two SEC nominees. These two nominees were Republican Hester Peirce and Democrat Lisa Fairfax. Now, “the Trump administration will have to submit SEC nominees — possibly two new ones — as well as a new agency chairman to the Senate for confirmation.” Two other pieces of legislation that could impact investment advisers also have uncertain futures. A “designed to make it easier for start-up companies to raise capital” by expanding the definition of an accredited investor and the Senior Safe Act “which would give liability protections to financial advisers reporting financial abuse of elderly investors” have both passed in the House, but failed to pass in the Senate as of now.

5. Eric Clarke Hatches Plan to Put RIA Fees Front and Center By Applying Sunlight to 1.5 Million Accounts (Author- Brooke Southall, RIABiz)

Eric Clarke, founder and CEO of Orion Advisor Services, announced that in response to the new DOL fiduciary rule Orion is “is launching a database that will allow, for free, the 1,000 customers of his performance reporting software to know what the other 999 are charging quantitatively and qualitatively.” To build this new fee benchmarking solution, Orion reviewed the Form ADV Part 2 filings for clients and also used other data mining techniques to better classify each type of advisor and account. However, Clarke does highlight that being able to better compare fees alone is not enough to help position the adviser’s services to client as “”the perception is that they’re being charged for investment management. That’s not really the case.” Brooke Southall also concludes with a similar thought that, “in other words, RIAs are failing to explain the inexplicable — how that fat 1% asset-based fee is paying the freight for grander oversight and advice related to all that the client considers his or her ‘wealth.'”

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule and cybersecurity. Happy new year and be sure to check back next Friday for next week’s top articles!