Each Friday, we are giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser (RIA) compliance and regulatory issues. This week’s recap focuses on how the Securities and Exchange Commission (SEC) conducts its examinations, findings from the SEC’s probes of RIAs over cryptocurrencies, techniques RIAs can implement to find new clients, why some advisers aren’t following the trend of outsourcing portfolio management tasks and the surprising enthusiasm advisers have expressed toward integrating cryptocurrencies into their financial planning.
Here are our top investment adviser compliance articles for the week of Jan. 27, 2023:
Inside the mind of the SEC (Author – Amy Lynch, Investment News)
- There are more than 17,000 SEC RIAs and perhaps 700 examiners.
- Each exam takes eight to 12 months to complete.
- The SEC has been making strides in improving its fintech. The agency wants its regulatory approach to be up to speed with the modern era of technology.
- The examination program takes a risk-focused approach. Registrants are selected for review based on an algorithm which contains a risk scoring metric, and each time a firm is examined, a new risk score is created, which determines when it’s visited again.
- Last year, the SEC examined 16% of all RIAs.
- In 2023, the SEC has an objective of examining 20% of all RIAs.
SEC probing RIAs over crypto custody compliance: report (Author – Alex Padalka, Financial Advisor IQ)
A recent Reuters report indicates the SEC has stepped up its probes of how RIAs manage digital assets like cryptocurrencies. The agency has been looking into whether RIA firms are following regulations regarding digital assets custody for several months. However, the recent crypto collapse prompted the SEC to further scrutinize how RIAs handle cryptocurrencies.
These probes reflect the SEC’s heightened interest in regulating digital assets. Last year, the agency nearly doubled the size of its digital assets and cyber enforcement team. Digital assets may be the way of the future, and the SEC is trying to keep up with the trends in the financial landscape.
9 ways advisors can drive and close more leads in 2023 (Author – Jeff Berman, Think Advisor)
Financial advisers continue to find it challenging to find new clients. During the ThinkAdvisor webcast, Samantha Russell, chief evangelist at FMG, and Susan Theder, chief marketing and experience officer at the financial adviser marketing firm, outlined techniques RIAs can use to find new clients. In addition to optimizing your website to increase traffic, Russell and Theder emphasized the importance of holding webinars, workshops, seminars and other events to attract a new audience. They stated, when hosting an event, RIAs should:
- Cover timely, relevant topics.
- Specify the audience who should attend the event in the title of said event. This will increase the number of attendees!
- Send at least three promo emails before the event.
- Turn to experts for help in planning and executing the event.
- Keep the event short.
Bucking the trend: why some advisers refuse to outsource investment management (Author – Jeff Benjamin, Investment News)
It’s trendy in the investment adviser space to outsource portfolio management. This allows investment advisers to focus on other tasks which add value to their firm, like prospecting for new clients and assets, while their clients’ needs are still being met. Arguably, the case for outsourcing portfolio management has never been stronger, with the investment management piece of financial planning morphing into commoditized, low-cost, easy access to mutual funds and ETFs.
However, some advisers have refused to go along with the trend, opting to roll up their sleeves and spend the time and resources to manage money in-house. Like Ryan Johnson, managing director at Buckingham Advisors, advisers who favor this approach state that “by managing our own portfolios, we’re adding value.”
More advisers are jumping on the bitcoin bandwagon (Author – Jeff Benjamin, Investment News)
In a surprising twist after the recent crypto collapse, a report indicates advisers are highly enthusiastic about implementing cryptocurrencies in their financial planning. The report indicates:
- 60% of financial advisers are long-term bullish on cryptocurrencies.
- 14% of advisers say all their clients are investing in cryptocurrencies, which compares to 8% last year and 6% two years ago. If advisers are starting to show a new interest in cryptocurrencies, it could be, at least in part, to try to keep up with their clients.
- 37% of advisers said they’ve invested in cryptocurrencies in their personal accounts.
- 25% of advisers said they use ETFs which invest in cryptocurrencies companies to gain exposure for clients.
- The second most popular way of gaining exposure for clients is by directly investing in various cryptocurrencies. 17% of advisers indicated they use this method.
Don’t forget to check out last week’s top RIA compliance news articles recapping the continuing education requirements which investment adviser representatives (IARs) would have to meet in 2023, the Department of Labor’s (DOL) independent contractor rule and how it would affect those who are currently considered independent contractors and the mixed responses to the SEC’s outsourcing proposed rule.