Top RIA Compliance News Articles for the Week of July 12, 2018

1. What’s Driving Non-Protocol Advisors to Independence? (Author- Mindy Diamond, WealthManagement.com)

In this brief podcast, Mindy Diamond digs into the trends on why non-protocol advisors are leaving their firm and opting for independence. Some of the questions Diamond answers include: What is driving this trend? How big a trend is it? And what can the rest of us learn from these advisors? Do they have anything in common? What traits do they share? What is so compelling about independence that these advisors choose to endure garden leave to obtain it? To listen to the podcast and hear her responses to the hard hitting questions, click here. 

2. Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House (Author- Mark Schoeff Jr., Investment News)

This week the House of Representatives approved legislation comprised of 32 bills including “bills to reform investment adviser regulation, expand the pool of sophisticated investors and protect senior investors.” As reported by Mark Schoeff Jr., “one of the bills, the Investment Adviser Regulatory Flexibility Improvement Act, was approved by voice vote last week in the financial committee.” This bill would require the Securities and Exchange Commission (“SEC”) to alter its definition of a “small business.” The other two notable bills include the Fair Investment Opportunities for Professional Experts Act, and the National Senior Investor Initiative Act, which “would require the SEC to create an interagency task force on financial exploitation of the elderly.”

3. More Mega-Teams Are Breaking Away: Schwab’s Clark (Author- Jane Wollman Rusoff, ThinkAdvisor)

As reported by Jane Wollman Rusoff of ThinkAdvisor, Bernie Clark of Schwab Advisor Services said, “The shift, about two years old and gaining steam, is part of the larger trend of big teams with ultra-high assets under management opting, increasingly, to become independent registered advisors.” So what is giving these teams the confidence to break away? According to Clark, “Large breakaways, especially from Goldman with its restrictive exit policies, give confidence to hesitant teams industry-wide to jump off that fence and finally go RIA.” Not only are these large team breaking away and entering the RIA space, they are joining forces to create even larger enterprises. To read excerpts from Clark’s interview with ThinkAdvisor, click here.

4. Bigger Is Better, but More Complicated, for RIAs: Cerulli (Author- Bernice Napach, ThinkAdvisor)

As reported by Bernice Napach, “more than a billion dollars in assets may be considered a dream come true for many RIAs, but it’s not without complications.” According to a new report from Cerulli Associates, “In this new phase of their business lifecycle, an RIA that crosses the $1 billion asset threshold essentially transforms from a professional practice to a functioning business.” Napach notes, “bigger enterprise requires institutionalization of processes, centralized staff support, specialized roles and a well-defined organizational structure as a growing number of advisors are spread across multiple locations.” 

5. Interesting Angles on the DOL’s Fiduciary Rule #98 (Author – Fred Reish, FredReish.com)

In his 98th article discussing the DOL fiduciary rule, Reish continues to dive deeper into the SEC’s Regulation Best Interest (“Reg BI”) and the “number of major changes to the governance of broker-dealers.” According to his article, Reish states, “The SEC’s best interest will require that a broker-dealer be diligent, careful, skillful, and prudent—which suggests a process—and that the process result in an investment that is in the best interest of the investor, with a greater emphasis on cost and compensation.” 

Don’t forget to check out last week’s top RIA compliance news articles on the SEC’s proposed advice plan, succession planning, and a new SEC risk alert on best execution. Be sure to check back next Friday for next week’s top articles!