More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- 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.
The Department of Labor's new rules for fee disclosure, which require plan sponsors to provide information about fees and expenses associated with a plan and to disclose compensation and conflicts of interest, as well as the agency's efforts to redefine fiduciary, were a frequent topic at the 2012 ASPPA 401(k) Summit.
"Obviously advisors are concerned about these proposals, but NAPA has energized them," Brian Graff (left), CEO and executive director of ASPPA, told AdvisorOne in an interview on Tuesday. "It's provided a forum for advisors to address concerns."
In the five months since it was formed, the National Association of Plan Advisors has grown to 3,000 members, Marcy Supovitz, president of NAPA, said on Monday at the 2012 ASPPA 401(k) Summit. "This is the fastest growing membership organization in our industry's history," she said. NAPA was launched by ASPPA in September to advocate for 401(k) plan advisors.
Graff encourages advisors not to go it alone when it comes to the DOL's fee disclosure regulations. "Advisors need to work with their partners and broker-dealers if they aren't already," he said. "The good news is there's some flexibility in defining how they are compensated; there's a good-faith standard. It's critical to work with their broker-dealers to find the best way to deliver the required disclosure."
Defining "fiduciary" will be a major change to expect later this year, he said. "There's a lot of market anticipation related to fiduciary. Wirehouses and broker-dealers are already putting procedures in place, and that's a trend that will continue," he said.
Graff is concerned that some advisors will be taken by surprise by regulatory changes.
"Advisors need to be aware that this is coming," he said. "There are a lot of advisors who aren't dedicated to the 401(k) space who just aren't aware of these changes."
Those advisors may offload the one or two plans they have. "It's unfortunate, but I expect a certain amount of non-compliance because a fair amount of advisors just miss it," he said. "They're not paying attention."
Ultimately, changes to fee disclosure regulations are for consumers, but it's difficult to gauge what their reaction will be.
"Consumers won't feel it until they see it," Graff said. "We won't know their reaction until these discussions start happening. It'll be fascinating to see if it's overwhelming for them. We're looking for what will benefit the most consumers, what makes it easy to evaluate information."