RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 2nd, 2019

Posted by RIA in a Box

Aug 9, 2019 1:37:42 PM

Capital One data breach impact to RIA firms

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 focus on the effects of the Capital One hack and crowdsourcing, implications for dually-registered advisers, investor questions for advisors from the Securities and Exchange Commission ("SEC"), and succession planning.  Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of August 2nd, 2019: 

A Guide to Transitioing from State to SEC Registration

1. Dually registered advisers found to have conflicts and higher fees  (Author- Mark Schoeff Jr., InvestmentNews)

Mark Schoeff Jr. walks through the findings of a recent study conducted by Nicole Boyson, professor of finance at Northeastern University, on the implications of dual-registrants and fees charged to clients. Boyson studied the ADV filings of 6,866 RIAs – 2,484 dually registered and 4,382 fee-only. In summary, Boyson concluded that dual registrants charge double the fees of typical registered investment advisers, have more conflicts of interest, and a higher likelihood of regulatory disciplinary actions. Boyson encourages investors to perform their due-diligence before hiring an adviser and be aware of the fees and implications that can be related to hiring a dual-registrant. Of course, it's important to note that not all dually registered advisers and the same and their business models and potential conflicts of interest may vary greatly.

2. Capital One Hack Poised To Boost 'White Hat' Crowdsourcing  (Author- Jenny Surane and William Turton, Financial Advisor Magazine)

Jenny Surane and William Turton suggest that the Capital One’s recent security breach that exposed the personal information of over 100 million people will likely elevate white-hat crowdsourcing efforts among major companies. Such efforts reward “white hat hackers” with cash bonuses and other rewards to identify potential security vulnerabilities in the company's current security infrastructure. While these security programs are beneficial in utilizing a diverse cybersecurity skillset, they also run the risk of damaging systems or exposing non-public information to the researchers themselves.

           3. If The SEC Is Telling You To Ask Your Financial Advisor These Questions, You Probably Should (Author- Fred Reish, Forbes)

As part of the new Regulation Best Interest, the SEC has recently released a list of questions for investors to ask when hiring an advisor. Leading attorney and expert on fiduciary issues, Fred Reish, provides a list of those questions and offers his expertise about the types of answers received when asking these questions.  Reish states, “Sometimes it makes sense to use an investment adviser. Investment advisers are different than broker-dealer advisers. Investment advisers charge a fee; they’re usually not paid commissions. And, they agree to provide ongoing oversight, or continuous ‘monitoring,’ of your investments, while broker-dealer advisers won’t usually agree to monitor your investments.”

 4.  Succession planning where the adviser keeps working? (Author- Scott Hanson, InvestmentNews)

While it’s critical for investment advisers to have a succession plan in place, Scott Hanson suggests that the best succession plan for advisers and their clients may be to merge with a larger firm. Hanson proposes the benefits firms can take advantage of by selling their firm including freeing up time, enhanced client service, and personal growth by focusing more on intrinsically motivating work. Hanson states, “Now, as part of a larger organization, where there are other people to help pick up the slack, you can be relieved of almost everything except for what you love and want to do.”

5. An Older Advisor Does Something Unusual: He Creates A Succession Plan (Author- Karen Demasters, Financial Advisor Magazine)

Gary Schwartz, founder and president of Madison Planning Group, shares his story of his firm’s succession plan, which entails turning the firm into a family business by lining up his two sons to take over the firm when Schwartz retires or is no longer able to. Industry experts weigh-in on the topic of succession planning noting that advisers are often taking a reactive approach to the planning. According to Lisa Salvi, VP of Schwab Advisor Services, “RIAs often wait for succession planning to be event-driven. Instead they should be thinking about where they want to be three years and five years from now. Doing nothing is a strategy, but it does not give you as many options. Planning brings a much wider range of options.”

Schedule a Demo of the MyRIACompliance Cybersecurity Platform

Don't forget to check out last week's top RIA compliance news articles focusing on the Capital One data breach, why Regulation Best Interest (“Reg BI”) matters for RIAs, and strengthening enforcement of fiduciary duty.


Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does 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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