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.
- 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.
“Tom Nally has big shoes to fill,” said Susan John as she introduced Nally as lunchtime keynote speaker at the NAPFA national conference in Chicago on Thursday, referring to his recent succession of Tom Bradley as president of TD Ameritrade Institutional. Not to worry, though, said the president of the fee-only planners group in her introduction of Nally, “because he has big feet.”
After the laughter subsided, Nally got serious in his first keynote address as TDAI president, first lauding the growing might of RIAs at the expense, mostly, of the wirehouses, but then urging his listeners not to miss the opportunities afforded by Generations X and Y as clients, and women. He also encouraged advisors to “focus on running a business rather than a practice,” defining what he meant by both terms. Nally finished by addressing the elephants in the RIA room: the SEC’s implementation of a fiduciary standard under Section 913 of Dodd-Frank and who will regulate advisors under Section 914.
As for the competitive status of RIAs, Nally (left) pointed out that while RIAs currently manage more than $2 trillion, “we can increase that tenfold if we start now,” partly by becoming better businesspeople. RIAs, he said, are “better positioned for growth now than at any other time,” encouraging planners to turn their practices into businesses by implementing a strategic growth plan, building a formal succession plan and focusing on branding. “Set one or two achievable goals,” he counseled, and “take advantage of your custodians’ resources” in building those businesses.
Getting to the meat of his presentation, he argued that the wirehouses “have shot themselves in the foot” by focusing on short-term profitability and by ignoring “the Gen X-Gen Y opportunity” of 75-80 million younger investors who will be the recipients of $18 trillion in wealth transfers from their boomer parents.
To market to those younger investors, however, Nally said advisors must create new offerings and educate the children of their current clients. Since, he said, the research shows that “every generation likes to work with their peers,” he also urged veteran advisors to hire younger advisors.
Acknowledging that some boomer advisors might have strong opinions about the "entitled" younger advisors, he nevertheless said that “junior advisors can help you attract younger investors, using their skills, especially in electronic communications. As for the future viability of their practices/businesses, he asked the crowd, “Wouldn’t you rather leave your clients in the hands of someone you trained yourself?”
Turning to the opportunities for advisors among female investors, he cautioned against “painting women too broadly” as to their needs. “Treat both members of a couple client equally,” he said, and realize that women want to be acknowledged for their individual needs and goals.
Finishing by addressing the current regulatory environment, he urged advisors to get involved with their legislators to make their voice heard, mentioning a templated letter that TD Ameritrade has made available on its website to make it easier to contact their representatives in Congress (and a separate website—findrepresentative.com—to easily find your representative’s contact information). “What you can’t control directly,” he said, “you can still influence.”
As for implementation of the Dodd-Frank Act, he worried that under Section 913 of DFA, the “worst-case scenario would be a watered-down fiduciary standard,” and related an exchange at an event between Skip Schweiss, who heads TDAI’s advocacy efforts in Washington, and Eileen Rominger (left), director of the SEC’s division of investment management. “Skip Schweiss asked Eileen Rominger directly how the SEC could expect a salesperson to operate under a fiduciary standard.” Her answer: “We acknowledge the complexity of the assignment.”
On Section 914 of Dodd-Frank, on who should regulate RIAs, he acknowledged that Rep. Spencer Bachus’ reintroduction of a bill that would dictate an SRO for advisors has “heated up” the issue. However, he said that “while we all are in favor of investor protection, the last thing we need is layers of regulation that will choke small businesses.”
Following Nally’s well-received speech, FPA President John thanked TD Ameritrade for its ongoing support of the RIA model and in particular the fiduciary standard for all advice-givers. TD, she said, “is the only custodian who’s been outspoken in the midst of all this regulatory mess.”