RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of January 17th, 2020

Posted by RIA in a Box

Jan 24, 2020 2:57:40 PM

Top_Compliance_Articles_of_the_week-17Each 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 the Securities and Exchange Commission's ("SEC") exam priorities for 2020, how to create a successful succession plan, and how to handle changing your fee structure.


Here's our top investment adviser compliance articles for the week of January 17th, 2020:

Matching your RIA Firm's Form ADV Parts 1, 2, and 3

1. Cautionary Tales from the SEC 2019 Annual Report (Author - Marianna Shafir, ThinkAdvisor)

With the start of the new year, financial advisors should take the time to reflect on their regulatory practices over the last year and what they can do to improve moving forward. The Securities and Exchange Commission (“SEC”) 2019 Annual Report is a valuable reference for advisors to better understand regulator’s expectations, especially focusing on these core principles: “1. Focusing on the Main Street investor; 2. Focusing on individual accountability; 3. Keeping pace with technological change; 4. Imposing remedies that most effectively further enforcement goals; and 5. Constantly assessing the allocation of resources.”

2. Succession Planning Essentials (Stephen Boswell & Kevin Nichols, WealthManagement)

When planning for retirement, you need to make sure all your bases are covered, especially when it comes to succession planning. Many advisors experience a rough transition when preparing for retirement because they do not start planning early enough. Stephen Boswell and Kevin Nichols address the importance of proper planning, “The point of the succession plan is to map out a seamless transition from one generation to the next. It’s difficult because it involves various challenging components. After all, is isn’t just the job title that transitions, it’s the ownership of the business, management of the employees and relationships with key clients.”

         3. Bank sweeps, payment for order flow: What regulators are looking at in 2020 (Author - Jessica Mathews, FinancialPlanning) 

Jessica Mathews discusses the Securities and Exchange Commission’s (“SEC”) exam priorities for 2020 and what changes to expect in comparison to 2019. Moving forward, the SEC and the Financial Industry Regulatory Authority (“FINRA”) will focus on “1. Preparation for Regulation Best Interest (“Reg BI”) 2. Digital assets and robo advice 3. Bank sweep programs 4. Best execution 5. Financial incentives and 6. Client communication”.

         4. Transparency with Diana B: The Psychological Effects of a Cybersecurity Breach (Author- Diana Britton, WealthManagement)

Unfortunately, cybersecurity is low on the priority list for many advisors until they are personally affected by an incident. Not only does this bring a sense of financial insecurity, but a lasting effect on an advisor’s mental health. Diana Britton sat down with Darrell Kay, principal of Kay Investments, to hear Kay’s personal experience with a cybersecurity breach and how he handled the mess that followed. Britton lists a few key points from her conversation with Kay, “How to better recognize the signs of a cybersecurity breach and/or communication with a hacker, ways to reduce stress, control your emotions and visualize a positive outcome when face with a similar situation, and measures you should take to change your procedures and your attitude”.

           5. 4 Reasons to Change Your Fee Structure (Author - Jarrod Upton, ThinkAdvisor)

An advisor must evolve to stay competitive in the industry, and a proper fee structure is a good way to cater to the needs of a client. Jarrod Upton, senior partner and chief operations at Herbers & Company, explains the fours reasons an advisor would want to change their fee structure, “1. To change a client’s perception of value vs. cost 2. A revenue stream not correlated to the markets 3. To increase fees to keep up with inflation 4. To introduce new services”. Upton also stresses the importance of clear communication with clients on why fees are changing, stating, “If you’re providing the right value, there’s no need to be afraid to talk about cost. Clients should be willing to pay a cost that is aligned with the value they receive. What clients don’t like is not knowing what they are paying for. If you can communication the cost of your value, you likely will have little client pushback on changes to your fee structure.”

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Don't forget to check out last week's top RIA compliance news articles focusing on cybersecurity, changes in the Securities and Exchange Commission ("SEC") Commission, and the future of Regulation Best Interest ("Reg BI").

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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