Top RIA Compliance News Articles for the Week of January 26, 2018

1. Interesting Angles on the DOL’s Fiduciary Rule #78 (Author- Fred Reish, FredReish.com)

The DOL fiduciary rule has been in effect now for over 6 months, and Reish still sees common misconceptions in interpreting the implemented portions; understandably so. This particular article addresses the myth, “that broker-dealers and RIAs, and their advisors, must only recommend the lowest cost investments, for example, mutual funds with the lowest expense ratios. That is not correct.” Reish states that as long as the “true cost” to the consumer is reasonable, the advisor can still remain in compliance. “The risk is in recommending an investment that is clearly more expensive than what is typically charged for that type of investment,” writes Reish. Granted, a fair amount of analysis must go into determining the true cost. This also, of course, must be documented.

2. Fiduciary Rules Mushrooming, CEOs Urge Colleagues to Get Political (Author-Andrew Welsch, FinancialPlanning)

Some see the DOL rule delay as a chance to re-start debate on regulations, Welsch writes. With the future in limbo, industry professionals want to cause a sea-change in the political negotiations over regulations. Political Action Committees are quite active nowadays regarding the issue, with the end goal being consistent, across-the-board regulation at the very least. However, once individual states become involved, this could complicate things further. Welsch says, “While regulators in Washington struggle over whether and how to harmonize different standards, the growing number of states looking to create their own fiduciary rules could leave the industry with an unruly regulatory patchwork, FSI leaders warned.”

3. Edelman, Policy Group Sound a Wake-Up Call on Retirement Security (Author- Melanie Waddell, ThinkAdvisor)

With the DOL fiduciary rule and broker protocol drama swirling, some other aspects of the financial industry have been perhaps quietly avoiding as much scrutiny. Ric Edelman is working to improve one: retirement security. Waddell reports, “the three-pronged issue that the initiative plans to tackle — saving Social Security, making it easier for people to save and producing a lifetime income.” Edelman is worried because Washington politicians are not discussing the issue at all. So he’s created ‘Funding Our Future: A Campaign for America’s Retirement Security’. Some other members of the campaign include Prosperity Now and UnidosUS. Aside from getting the conversation on Capitol Hill started, he also wants to raise consumer awareness.

4. The Big Hack Attack (Author- Eric Rasmussen, Financial Advisor Magazine)

When a Cincinnati advisor decided to test his cybersecurity muscles, the results were not what he was expecting. He hired a security firm to try to hack him, and they did. This, however, may not surprise many. “Cyber criminals have become increasingly sophisticated, and all financial services firms are ripe targets for frauds. In 2016, the FBI’s Internet Crime Complaint Center received almost 300,000 complaints for almost $1.3 billion in losses. According to the IBM X-Force Threat Intelligence Index, the financial services sector was attacked more than any other industry that year,” Rasmussen says. Precautions that can be taken include penetration tests and cybersecurity questionnaires for third-party vendors. 

5. The Evolving Role of the CCO (Author – Daniel Solo, ThinkAdvisor)

Compliance officers have become one of the most important roles in a financial advisor’s business. Solo argues the trend of regulation began with George W. Bush’s Patriot Act. From there, he says, it became a slippery slope, and compliance professionals became indispensable, especially recently. “Last year turned out to be a noteworthy one for the chief compliance officer. Over the past year, we saw a shift in compliance officers in financial services in terms of tenure, profile and leadership. To put this into perspective, the top 6 largest financial institutions in the U.S. include banks ranging in size from $2.5 trillion to $841 billion in assets, and five of these massive banks changed their leadership in the compliance function during the calendar year,” Solo reports.

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