Top RIA Compliance News Articles for the Week of December 3, 2016

1. RIAs Have Been Slow to Prepare for the DOL Fiduciary Rule (Author- Mark Schoeff Jr., Investment News)

RIAs everywhere are on close watch when it comes to the updates on the status of the looming DOL fiduciary rule but many experts believe that RIAs are not fully prepared for the potential rule. Mark Schoeff Jr. writes that while the rule most directly impacts broker-dealers, the rule still does impact RIA firms especially in scenarios, “when an RIA encourages a client to roll money from a 401(k) into an IRA, or when they advise a client to move from a brokerage account to a fee account, the client might have higher costs — and the adviser a new revenue stream — under the arrangement.” to the  problems are starting to arise because of the opportunity of a “best-interest contract exemption.” In such situations, most RIA firms should be able to take advantage of the “level fee exemption” often referred to as “BICE-light.” However, Schoeff further writes that, “even a “BICE-light” comes with requirements that RIAs don’t have to meet under the SEC fiduciary standard.” Be sure to also check out our earlier post on How an RIA Firm can Comply with the new DOL Fiduciary Rule.

2. DOL Fiduciary Rule Likely Delayed, Not Derailed (Author- Melanie Waddell, Think Advisor)

Advisors and broker-dealers are advised to continue preparing for the April compliance date. There is a lot of discussion as to the DOL’s response to the fiduciary rule, but many believe that current signs point to the rule being delayed rather than repealed. Blaine Aikin, head of Fi360, and Skip Schweiss, head of advisory advocacy at TD Ameritrade Institutional, both agree that a delay is more likely to occur than announcing the rule as “dead.” Schweiss notes that firms need to continue to prepare for the rule as firms who take a “time out” are “taking a real risk with your business.” Aiken concurs, “I don’t think you can safely assume the rule will be reversed, and I don’t think the market can go back. We’ve already seen commitments on the large firms to make changes and they’ve indicated that won’t move back.”

3. The Presidential Election: Now What? (Author- Fred Reish, FredReish.com)

Last month’s presidential election is causing anxiety to all RIA representatives, broker-dealers, and even independent insurance agents. Fred Reich’s gut feeling is leaning towards the rule being to retained, but altered to include more disclosures and less prohibitions. His statement is supported by three reasons: “the fiduciary rule was’t the source of the great objections to the DOL’s guidance, …there is an argument that a rule that requires that retirement money be invested in the best interested of the investor is not objectionable, …because of the ongoing retirement of baby boomers, and the rollover of their money to IRAs, there many be a perceived need to protect retirees.” Be sure to check out this thoughtful piece from Fred Reish who is one our top 5 DOL fiduciary rule experts that every RIA firm should follow.

4. DOL Rule Weighs Heavily on Advisors as New Year Apporaches (Author- Thomas Seubert, Wealth Management)
   

Results from a SEI survey showed advisors are most worried about two potential challenges related to the DOL fiduciary rule: compliance and fee compression. Other important takeaways include how much the ruling will affect advisors on the previously stated issues, along with the concern of technology investment. Wayne Winthrow, head of the SEI Advisor Network, notes that a technology investment can include an “increase attention to client-facing activities and focus on the outsourcing of non-client-facing activities” Lastly, the survey indicated 52% of advisors feel “ready” or feel “almost ready” for the new regulation with the majority feeling “almost ready.”

5. Regulatory change is coming: What to do now (Author- Knut A. Rostad, InvestmentNews)

With the DOL fiduciary rule scheduled to become effective April 10, 2017, barring any last-minute changes from the new Administration or Congress, Christopher Gilkerson, senior vice president and general counsel of Charles Schwab & Co., Inc., sat down with Kristina M. Zanotti, a partner at K&L Gates LLP to hear about a “next steps” checklist for independent RIAs to review in preparation. She advised RIAs to review their business model and pre-contract activities to be sure advisers distinguish between discretionary and non-discretionary “investment advice.” She also mentioned it’s particularly important to review the new client onboarding process to ensure compliance with the new rule.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule. Be sure to check back next Friday for next week’s top articles!