More On Legal & Compliancefrom The Advisor's Professional Library
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
While Senator Christopher Dodd's financial services reform bill, as it currently stands, excludes a fiduciary standard for brokers, Don Trone, CEO of Strategic Ethos--and founder of Foundation for Fiduciary Studies--says he doesn't think proponents of the fiduciary standard "are losing any significant ground." The momentum, he says, "is still toward a fiduciary standard, and we're just going to take a more prudent timeline to get there. The wirehouse leadership, even post Dodd, continue to talk about embracing a fiduciary standard."
Ultra-high-net worth folks, too--particularly after the Madoff Ponzi scheme--are embracing "fiduciary-like" standards as well, Trone says. "The ultra-high-net-worth have an aversion to the word fiduciary because...the term has been associated with private trusts and their roles on philanthropic boards," he says. High-net-worth families "feel they are incurring liability in the management of their own wealth, and they don't like that position." However, after the Madoff scandal, there's been a "very strong reaction from the wealthiest families around the world for someone to take the initiative to define standards for wealth management," Trone says.
That is why, he says, Strategic Ethos along with Charles Lowenhaupt, the CEO of LGA Global Advisors, have developed just such wealth management standards and put them out for public comment on the Institute for Wealth Management Standards' Web site, wealthstandards.org.
The comment period will run for another quarter. "Charles and his global council--which is made up of some of the top advisors to some of the wealthiest families around the world--developed the principles for wealth management, and once they were completed with the principles, they asked me to then define the standards, the process to fulfill the principles," Trone says.