More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
While broker-dealer executives agreed during a panel discussion at the Financial Industry Regulatory Authority’s (FINRA) annual meeting in Washington on Monday that the time had come for a single fiduciary standard for brokers and advisors, they argued that the industry should work with regulators to ensure that a hasty decision wasn’t made on how to implement such a standard.
With a single fiduciary standard for advisors and brokers, “I’m a bit concerned that we are seeing a big push to sending the market to an advisory based platform, and we may be sorry we didn’t create an even-handedness” for clients in using a brokerage model too, said Mark Casady (left), CEO of LPL Financial. “The time for us to define this [fiduciary] difference is here …, but I’m one for gradual change,” he said. Casady also said that he supports FINRA becoming the self-regulatory organization (SRO) for advisors.
Indeed, Sallie Krawcheck (right), president of Global Wealth and Investment Management at Bank of America, said that she worried a single fiduciary standard would be “too broad,” and that defining who has a fiduciary standard “opens up” the big question “what is personalized advice?” Like Casady, Krawcheck agreed that the industry could successfully achieve a single fiduciary standard “if given time.”
Jim Weddle, managing partner of Edward Jones, noted that while a “unified standard [for brokers and advisors] is where we need to be, a one-size-fits all [standard] is not good for all investors.” Weddle went on to say that he hopes “some standardization of disclosure” would be required under a single fiduciary standard so that “we can all speak in one language.” The industry—brokers and advisors—“need to work together to create some common language….we have to work with regulators to do this sooner rather than later.”
Casady, Krawcheck, Weddle and Mark Cresap, president of Cresap, Inc., all participated on the panel discussion, which was moderated by Richard Ketchum, chairman and CEO of FINRA.
When asked by Ketchum about their concerns regarding the Department of Labor’s (DOL) rule regarding advisors’ fiduciary role, Casady with LPL said he worries the DOL is “overreaching” into retail brokerage accounts with its proposal to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA).
Three years after the market meltdown, all of the panel members noted clients’ heightened sense of awareness in risk, and noted the importance of helping clients assess risk in their portfolios, Casady noted that clients of LPL’s advisors are focused on “saving more,” while Krawcheck agreed that clients’ “No. 1 concern” is having enough retirement savings.
Krawcheck urged the industry as well to seek more opportunity abroad. “Our industry is overweight in the United States, and we as an industry need to get rid of that bias and go abroad,” she said. “So much of the growth is going to be outside the U.S.”
Cresap noted that while “it’s good” to invest abroad, “you have to watch the fees.”