RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of October 16th, 2020

Posted by RIA in a Box

Oct 23, 2020 5:39:11 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 successful use of video by advisors, the Securities and Exchange Commission ("SEC") still finding omissions of disciplinary history on Form CRS, and what should be considered when deciding to go independent. Here's our top investment adviser compliance articles for the week of October 9th, 2020:

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          1. 5 Ways Advisors Can Use Video and Stay Compliant (Authors – Candice Carlton and GJ King, ThinkAdvisor)

Since the beginning of the pandemic, advisors have had to adapt and find ways to effectively communicate with clients or prospects remotely. Candice Carlton, senior vice president of FiComm Advisor Education, and GJ King, president of RIA in a Box, dive deeper into the creative ways’ advisors are communicating, with video being at the top of that list. For example, “Advisors are leveraging the power of video to build trust on the front end so that by the time a prospect meets with them, they feel like they already know them. Likewise, when used across the client experience, advisors are able to add value to clients beyond the traditional semi-annual meetings.”

2. Clayton Fires Second Warning Shot to Firms Omitting Disciplinary History on Form CRS (Author – Tracey Longo, Financial Advisor Magazine)

Earlier this week at the Securities Industry Financial Market Association ("SIFMA") conference, SEC Chairman Jay Clayton issued another warning to firms who have omitted their disciplinary history on Form CRS. The SEC first reported seeing these omissions at the beginning of the month, and the concern has only grown since. Clayton has shared his concern as well, stating that “a firm’s or advisor’s disciplinary track record is one of the single most reliable indicia of future problems. I’m not saying that everybody who had a disciplinary history is going to have a future problem but customers should know.” The SEC will be hosting a virtual roundtable on October 26th to review the topic and other issues with Form CRS.

         3. Finding the Clearest Breakaway Path Towards Independence (Author – Jeff Benjamin, InvestmentNews)

Jeff Benjamin and industry experts discuss the process of going independent and what is to be expected. When deciding to go independent, there are two paths to choose from: “pure independence, which means setting up a business, registering with regulators and handling everything from compliance and technology to marketing and payroll. And then there’s the other end of the spectrum of the so-called tuck-in to an existing platform and RIA”, Benjamin explains. Marilyn Miles, vice president at National Regulatory Services, weighs the pros and cons, “One of the pros of starting your own RIA is you get to determine how to organize and tailor your business, and decide the risks you’re willing to take. The negative of starting your own RIA is you are responsible from a compliance standpoint for all of that. But if you join an existing RIA you are stuck with what they have.”

         4. Reg BI Promotes Same Standard of Care Across Advice Models: SEC’s Clayton (Author – Mark Schoeff Jr., InvestmentNews)

Since the June 30th implementation date of Regulation Best Interest (“Reg BI”) and Form CRS, the Securities and Exchange Commission (“SEC”) and Chairman Jay Clayton have been monitoring the response and outcome carefully. “I think it’s going pretty well. We now have a fair amount of harmonization across the customer experience whether you’re in a commission model or a fee-for-service model. We’re very happy that we have preserved that customer choice. It enhances competition,” Clayton said. Included in Reg BI was an updated SEC interpretation of the investment advisers’ standard, which Clayton explains, “I hope that the scope of the adviser-client relationship is better understood,” as a result.

           5. Why Billion-Dollar RIAs Keep Getting Even Bigger (Author – Karen Demasters, Financial Advisor Magazine)

Earlier in the year, Charles Schwab released The Schwab 2020 Benchmarking Study, which included 1,010 registered investment advisor (“RIA”) firms of varying sizes. From there, Schwab performed breakout studies on both small firm and large firm data. According to the study on large firms, “registered investment advisors with more than $1 billion in assets under management (“AUM”) are experiencing robust growth, in part because of their innovative use of technology.” The report also found “robust five-year compound annual growth rates in the following areas: AUM increased by 9.2%; revenue by 7.4% and the number of clients by 4.4%. The study also found that assets added by new clients was more than the growth of assets from existing clients.”

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Don't forget to check out last week's top RIA compliance news articles that focus on Form CRS disciplinary disclosures, CFP board remote tests, and a push for consistent regulation of the fee-for-service model.

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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