More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- How to Avoid Sabotaging Your Compliance Exam There is much more to compliance examination survival than knowing all of the rules. It helps to understand why the rules were put in placeand to recognize that examiners are not the enemy.
The regulatory reform advisors are facing is “nothing less than stunning,” Amy Glynn, president of Pension Resource Institute told attendees on Monday at the Center for Due Diligence’s 2011 conference. Broker-dealers have been managing their businesses in a “silo manner,” she said, something that will have to change as rules take effect.
Chad Gutner, business development consultant at Commonwealth Financial Network, agreed. Advisors will begin “taking things into their own hands” if their BDs don’t take charge.
Only Rule 408(b)(2) requires advisors to do anything affirmative, Jason Roberts, founder and CEO of PRI, said. Advisors must disclose the state in which they do business, their indirect and direct compensation, which services they provide that require fiduciary status and their compensation for termination.
Both advisors and registered reps need a “solid suite” of products and services to offer their clients, Glynn continued. In addition to their fiduciary duties, investment education to plan sponsors, committee support to help sponsors perform their duties, assistance with selecting and monitoring service providers and exam readiness support are examples of some of the services advisors can offer to differentiate their business.
For example, 81% of pre-retirees do not have a written retirement plan. Why not be one of the advisors who do offer a written plan “and make that part of your education strategy?” Roberts asked.
It’s important to have solid processes in place to make sure that you don’t drop the ball, Gutner said. Advisors must do a better job of describing and selling their services, he continued.
Roberts presented a sample plan for complying with 408(b)(2) procedures. First, advisors must identify covered plans and service providers under the rule. Then, advisors must establish a process to track disclosures and evaluate their success or provide more information. Benchmarking fees is an important step that should not be overlooked.
“Measuring your own success is huge to proving your value. It’s OK to charge more if you’re providing more, but you have to articulate that,” Gutner said.
“If you’re going to be driving the conversation,” Roberts added, “drive it toward value.”
Finally, advisors should continually document their process.
The No. 1 catalyst for the Department of Labor to launch an investigation is an angry call from a disgruntled employee, Glynn said. Therefore, to handle participant inquiries consistently and thoroughly are vital. “This will create the most noise in our marketplace,” he said.
Participant inquiry procedures have to be part of an ongoing process with a formal intake that is logged perpetually, a formal response to client complaints or questions and a confirmation with that participant that the information is satisfactory.