Top RIA Compliance News Articles for the Week of January 19, 2018

1. The New Form ADV: What Advisors Need to Know and Do (Author- Bernice Napach, ThinkAdvisor)

Napach warns that the new ADV form will be more complex than ever before. She says, “RIAs have to complete a revised ADV Part 1A form, which requires far more disclosure about separately managed accounts (SMAs), social media, multiple offices and more.” She points out the new form’s broad scope, applying it everyone from RIAs to private equity funds. Some highlights and FAQs from the new ADV form include social media disclosures, more detail on types of clients, and separately managed accounts. In addition, “RIAs are required to report the approximate percentage of SMA assets invested in 12 broad categories of assets including ETFs; government, corporate and muni bonds; cash and cash equivalents; and derivatives.” These are just a few items from the new ADV that could trip up an unprepared advisor.

2. DOL Rule Still the Top Regulatory Concern for Advisors (Author-Rita Raagas De Ramos, FinancialAdvisorIQ)

Though the DOL rule is only partially in effect presently, it is still at the top of industry professionals’ minds. Advisors are doing the best they can until the delay is over, which is to work on compliance with the Impartial Conduct Standards. “Specifically,” Ramos writes, “advisors must charge no more than reasonable compensation, avoid making materially misleading statements, and provide advice that is in the investor’s best interest.” On the whole, advisors are fretting over the instability and complex nature of the rule, and the effect that could have on their businesses and clients. Some are combating this with enhanced training and other advisor tools. Even this could be futile though, as Securities and Exchange Commission (“SEC”) Chair Jay Clayton has stated that consistency across the industry are not his priority, citing “different business models” as the reason.

3. Regulators Looking At Protocol, RJ’s Reilly Says (Author- Dan Jamieson, Financial Advisor Magazine)

While Morgan Stanley broke the mold in leaving the broker protocol, regulators may be keeping an eye on the situation, Jamieson reports. Raymond James’ chief executive, Paul Reilly has brought the issue up himself. Raymond James itself is unique in that it allows departing advisors to own their client books. The idea is to attract more advisors in the first place. Reilly stated that many in the industry said this policy would hurt the firm in the long run. The numbers say differently. “Those advisors — together with a bull-market tailwind — helped the firm post a number of record financial results as well, including record quarterly net revenues ($1.23 billion, up 19 percent from a year ago), record quarterly pre-tax income ($155.1 million, up 111 percent after a charge-off last year), and record retail assets under administration ($692.1 billion, up 18 percent),” reports Jamieson.

4. After PayPal Demurs, Michael Kitces and Alan Moore Launch Online Payments Firm for RIAs (Author- Brooke Southall, RIABiz.com)

Electronic transfers for RIAs have been hard to come by. Southall states, “The principals of Bozeman, Mont.-based XY Planning Network are launching AdvicePay, a software company that helps advisors to charge for financial plans without taking custody of any assets — including cash. Currently the only way to do that is to collect fees by a paper check. Collecting fees via credit card invariably triggers a custody audit.” The software can do this via credit card or ACH (automated clearinghouse). The product also keeps client information safe by preventing access to sensitive items, and it allows clients to “manage their payment information.” In regards to pricing, “AdvicePay will charge a flat monthly $50 fee per user and 1.5% on the funds that flow through ACH,” says Southall.

5. How New Leadership at DOL Could Address Retirement Rules (Author – Blaine Aikin, FInancial Advisor Magazine)

Aikin speculate that while many have anticipated that the republican-led White House would reduce regulations around the financial sector, but the Department of Labor may not follow this path. Under Preston Rutledge’s leadership, new regulations are expected. The most obvious is the DOL rule, but Rutledge hasn’t commented very much on it. He does however, want to “promote annuity options in 401(k) plans. Sources say he also may back some Obama-era regulations regarding retirement funds. Aikin reminds us though, that things could go either way. “Mr. Rutledge will have his hands full but, given his expertise in retirement issues, it’s likely he will push to make it easier to save for retirement. This could take the form of cutting from or adding to regulations, or issuing guidance to redefine rules already in place,” he writes.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, the release of FINRA’s 2018 budget, and the broker protocol.  Be sure to check back next Friday for next week’s top articles! 

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.