Top RIA Compliance News Articles for the Week of March 19, 2016

1. The DOL and SEC Fiduciary Rule and the Two-Hat Dilemma (Author- Bob Clark, ThinkAdvisor)

Bob Clark writes about a recent email exchange with Michael Kitces in which Kitces articulates the reasons behind his opposition to a uniform fiduciary standard for brokers and investment advisers. This then leads to a back and forth dialogue in which Clark makes the case that the broker dealer industry’s move into the advisory world over the course of many years is the direct cause of the soon to be released Department of Labor (DOL) fiduciary rule. Clark further makes the case that the current broker dealer business model that has evolved does not benefit individual brokers or clients. This is a controversial piece sure to spark some strong reactions from all sides but is definitely worth a read.

2. The DOL Rule Will Impact RIAs, Too (Author- Kathleen Beichert, Financial Advisor Magazine)

Registered investment advisers are starting to wonder whether or not the final DOL rule will impact their business and clients. As Kathleen Beichert writes, the new rule has potential to complicate IRA rollover advice provided by RIA firms. It is possible that fee-only RIA firms operating exclusively as fiduciary advisors would need to utilize the Best Interest Contract Exemption (BICE) or some other type of exemption when advising on IRA rollovers. It is possible that the rollover issue and others discussed in the article will be better addressed in the final DOL rule. The final DOL rule is expected to be released within the next few weeks.

3. Fiduciary Rule: A Lifeline for Robos? (Author- Suleman Din, Financial Planning)

According to Morningstar equity analyst, Michael Wong, the DOL fiduciary rule could provide a “second wind” for automated online investment platforms commonly referred to as “robo advisors.” It’s possible that one of the leading online platforms, Betterment, has positioned itself for maximum benefit from the fiduciary rule by launching its 401(k) investment platform in January. In addition, Eric Clarke, CEO of Orion Advisor Services, suggests that for traditional advisory firms that “don’t use technology to automate processes and drive internal costs down, it will be difficult to sustain current profitability” following the implementation of the DOL fiduciary rule.

4. SEC’s 12b-1 Crackdown to Go From Trickle to Deluge (Author- Nicolas Morgan, Think Advisor)

A recent enforcement action by the Securities and Exchange Commission’s (SEC) in regards to investment advisory firms “placing clients in share classes that charged fees for marketing and distribution even though the clients were eligible to buy shares in an institutional share class, or Class I, that did not charge such 12b-1 fees” has once again brought 12b-1 fees front and center in the RIA compliance world. The SEC also charged the investment advisers with failure to disclose the relevant conflicts of interest in their Form ADV, client service agreements, and other account documentation. It is crucial that all RIA firms always uphold their fiduciary duty by selecting investments that are in the best interests of their clients even if the investments are less profitable to the advisory firm.

5. The Keys to Successful Succession Planning (Author- Liz Skinner, InvestmentNews)

While this article is less directly focused on RIA compliance, Liz Skinner discusses some of the key components for an RIA firm to consider when developing a succession plan. In particular, she addresses minimizing the changes for clients, keeping the same service team in place, and how to best communicate a transition to clients. Succession planning is not only a hot investment adviser compliance topic, but also a key strategic business decision, and for firms looking to craft or improve upon a succession plan, this is a great read.

Be sure to check back next Friday for next week’s top articles!