More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
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."