Top RIA Compliance News Articles for the Week of November 24, 2017

1. Ron Rhoades Sees Grim Fiduciary Rule Future (Author- Jane Wollman Rusoff, ThinkAdvisor)

Though Ron Rhoades is a supporter of the DOL fiduciary rule, the expert expresses serious doubts about its future. While he believes it will certainly be implemented, he believes the rule may prove ineffective. In regards to Rhoades’ remarks, Rusoff writes, “the rule will emerge diluted and, overall, light on enforcement.” Though Rusoff’s interview and article took place before the official delay of the DOL rule, Rhoades had already sensed that the further delay was imminent. He has also predicted that it will be left to the states to hash out financial advisor fiduciary standards. Rhoades also expesses concern regarding the parts of the rule that went into effect on June 9, 2017, stating that most industry professionals have disregarded it. 

2. Pro-DOL Rule Forces Sharpen Knives Now That DOL Rule’s 18-month Delay is Carved in Stone (Author- Brooke Southall, RIABiz)

Southall argues that the Department of Labor is perhaps pandering to Wall Street by implementing the DOL rule delay. He quotes a news release from the U.S. Department of Labor which states: “Thus, from June 9, 2017, to July 1, 2019, the Department will not pursue claims against fiduciaries working diligently and in good faith to comply with the Fiduciary Rule and `prohibited transaction exemptions`, or treat those fiduciaries as being in violation of the Fiduciary Rule and PTEs.” In response, the Consumer Federation of America may be gearing up for a battle. Lawyers are predicting lawsuits, both from the public and private sectors.

3. Operating in a Post-DOL World (Author- Rob Klapprodt, Wealthmanagement.com)

The phrase “post-DOL world” may be slightly deceptive, but the fact remains that parts of the DOL rule have been in place since June of this year. While debates swirl, life has to go on. Though the full implementation of the DOL fiduciary rule is delayed, the pieces in effect since June are still enforceable. The Impartial Conduct Standards in particular, must be followed, Klapprodt writes. He also says firms still need to be preparing for post-delay compliance operations, as there is “heavy lifting” to be done there, such as providing proof that they are indeed acting as a fiduciary. This can be the main point of contention for detractors of the rule. “The disproportionate emphasis on the toll the rule will take on business resources and overhead makes it easy to lose sight of the rule’s good intentions,” Klapprodt says. 

4. UBS Broker-Protocol Exit Shows Independent Channel is Bleeding Wirehouses of Advisers (Author- Bruce Kelly, InvestmentNews)

Now that UBS is joining Morgan Stanley in leaving broker protocol, Kelly writes that it is becoming more evident that large brokerage firms are losing talent much faster than they can recruit it. Speculation is flying that Merrill Lynch will be next to exit, only reinforcing the idea. When talented brokers can leave and take their clients with them, the hole blown in the wirehouse firms is much larger than was previously thought. UBS had hinted that this was a problem in the past, indicating that they were focusing more on retention, and less on recruiting. Kelly writes that once Morgan Stanley took the lead, all UBS had to do was follow.

5. Banks Struggle With Privacy Vs. Protection For Elderly Clients (Author – Karen DeMasters, Financial Advisor Magazine

The simple solution of having senior clients sign Power of Attorney in order to shield them from exploitation is now a thing of the past. “The issue of how to protect the elderly from financial fraud and exploitation was explored by financial experts, industry representatives and financial advisors at a conference on ‘Aging, Cognition, and Financial Health: Building a Robust System for Older Americans’ in Philadelphia Tuesday and Wednesday,” DeMasters writes. Financial institutions of course do their best to protect all clients, and have an eye out for particular red flags regarding senior citizens. Some include a new friend or relative accompanying a client to meetings, or an account suddenly bouncing checks. However, especially now when cybersecurity is such an issue, privacy is a major concern.

Don’t forget to check out last week’s top RIA compliance news articles on  Securities and Exchange Commission (“SEC”) surprise examinations, 2018 SEC exam priorities, and the reasons to start an RIA firm. Be sure to check back next Friday for next week’s top articles!