More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Did you ever have one of those “Aha!” moments when you were in the middle of a conversation? Well, it happened to me the other day while I was having a chat with Marilyn Mohrman-Gillis, the director of government affairs for the CFP Board. Marilyn had read my last blog on the Board’s plan to raise its fees 80% to pay for an advertising campaign, and she kindly called to explain the full details, in case I missed them.
She did a very thorough job of describing all the thought and hard work that’s gone into the proposed $9 million-a-year advertising campaign that the Board is going to make a final decision on this month. Marilyn talked about the Board’s year-long feasibility study that included survey research and focus groups to determine what the public’s current perception of financial planning is (not very good); what might resonate with folks (comprehensive planning and a client-first approach); and whom would be the best target for a limited ad campaign (the “mass affluent” with $100k to $1 million in investable assets). Seems as if high seven figures doesn’t go a long way in the advertising biz today.
Despite Marilyn’s masterful grasp of the myriad details if the campaign and the reasoning behind it, one question kept running through my mind: Why did the Board want to do this now, with so much uncertainty at the SEC regarding a fiduciary standard for brokers and what the future regulation of all advisors will look like?
When I raised this niggling issue with Marilyn, she gave the standard answer for every bad decision (there’s never a good time…), and pointed out that CFPs have been asking for a financial planning public awareness campaign for years. She cited the Board’s polling of CFPs on their willingness to pay for it, which is apparently quite high, although it’s not clear to me that the Board mentioned it would be an 80% fee hike in its survey of certificants.
Still, the timing of the campaign bothered me; there just didn’t seem to any compelling reason for it, and acting as if the SEC’s impending reregulation was a none-event made no sense to me. Then, it hit me—suppose the rereg is the reason for the campaign?
Now, I’ve been doing this a long time, and have been accused on more than one occasion of having acquired a rather cynical view of much of the financial world. But is it possible that the Board sees the potential fiduciary standard for brokers as an opportunity to sign up more CFPs? That suddenly leveling the playing field for advisors would increase demand for a way to differentiate? (Not to mention that a mandated fiduciary duty for brokers would eliminate one of broker compliance departments’ major objections to having a CFP.)
Now, don’t get me wrong: it’s always been the CFP Board’s aim to attract more CFPs, and with a few notable exceptions (such as CFP Lite), I don’t have a problem with that. But to launch a major ad campaign to get more CFPs and nearly double the fees of existing CFPs to pay for it? That’s almost too Machiavellian even for the CFP Board.