RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of July 1, 2017

Posted by RIA in a Box

Jul 7, 2017 12:06:20 PM

January 1, 2018 DOL fiduciary rule deadline

Each week we’re 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 potential further delays related to the Department of Labor ("DOL") fiduciary rule and new risk tolerance tools. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of July 1, 2017:

Download the Checklist on how to Comply with the DOL Fiduciary Rule

  1. What's Next for the DOL Fiduciary Rule? (Author- Janet Levaux, ThinkAdvisor)

As reported by Janet Levaux, Editor in Chief at Investment Advisor & Research magazines, the DOL is looking for comments from broker-dealers and investment professionals regarding the full applicability implementation date (January 1, 2018) and other issues related to the DOL fiduciary rule. The department has stated that opinions, “could form the basis of new exemptions or changes/revisions” to the rule itself. Levaux says to keep an eye out for “possible changes to enforcement and perhaps even to the applicability date of regulations in 2018”. While hard to predict, there is growing consensus that the January 1, 2018 deadline is likely to be further delayed.

  1. DOL defends fiduciary rule in brief to appeals court in industry lawsuit (Author- Mark Schoeff Jr., Investment News)

The DOL rule has been to court lately. In Dallas, financial industry trade associations argued that the DOL doesn’t “have the authority to promulgate the regulation”. In a brief to an appeals court, the Department of Justice ("DOJ"), on the DOL’s behalf, stated that these associations “failed to make their case”. However, the DOJ did say that “it would not defend a provision of the rule that would allow investors to file class-action suits against financial advisers who violate the best-interests standard.” Supporters of the rule see this as a positive sign that much of the rule may remain intact.

  1. DOL Rule Not Just About Costs (Author- Dan Moisand, Financial Advisor Magazine)

Dan Moisand, principal of Moisand, Fitzgerald, and Tomayo, writes that most media seems to concentrate too much on the cost comparisons associated with the DOL rule. “The more common problem we run into with many plans is they will only allow their beneficiary form to be used.” He states that IRA custodians use tailored beneficiaries more freely, and rejects the idea that the cost to the client being higher with an advisor than without, is a problem. He also encourages advisors to ease up on justifying their costs.

  1. LPL Financial's DOL-rule memo to reps implies deeper message: Become an RIA or stand down on giving rollover advice (Author- Lisa Shidler, RIABiz)

Industry reporter, Lisa Shidler, brings us this RIABiz article on how LPL Financial, the largest independent broker dealer, is confronting the DOL fiduciary rule. A new DOL fiduciary rule compliance memo issued to all LPL advisors says, "On the brokerage side, they cannot recommend," says LPL spokesman Jeffrey Mochal. He also states, “it’s an education-only policy with respect to rollovers.” Some, however, think it’s a good idea to “parse the regulatory duties of brokers and hybrids to avoid lawsuits,” asserts Fred Reish.

  1. Advisor Makes Risk Tolerance More Meaningful (Author- Jerilyn Klein Bier, Financial Advisor Magazine)

In 2009, advisors “typically weren’t incorporating a clients cash flow into advice as important as a risk directive,” asserts Mark Friedenthal. As a direct result, Tolerisk, a risk management tool, was born. “The product allows [an advisor] to do a two-dimensional risk assessment that combines a client’s personality profile and ability to take risk, based on cash flow.” Gathering a client's proper risk tolerance is a key component of the RIA compliance suitability documentation process. Will Bressman, RIA in a Box CEO, comments, “Matching risk tolerance on an ongoing and pretty granular level, as opposed to a lot of the generic stuff that exists out there, is very appealing. It’s an area that enhances the advisor relationship and enhances the overall compliance of a firm.”

Download the SEC 2017 RIA Top 10 Exam Priorities Checklist

Don't forget to check out last week's top RIA compliance news articles on the DOL fiduciary rule and the future of RIA regulatory audits. Be sure to check back next Friday for next week’s top articles! 

Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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