More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
I don’t usually respond to comments made about other people’s writings (for obvious reasons). But I feel compelled to put in my two cents on a comment Blake Woodard made about fi360/AdvisorOne’s 2012 Fiduciary Survey, because it raises a rather important point about an important survey which I wrote about in my blog on June 20.
“Shame on the two entities conducting this survey for misinterpreting the results to imply that registered reps are in favor the expanding the fiduciary standard for securities sales or the fiduciary definition for ERISA,” Woodard wrote. “The raw results, shown in this article, do not give any such indication. While the article says that 45% of respondents are either registered reps or dually registered as reps and IARs, only 10% of the respondents were pure registered reps. Attributing the responses of dually registered reps to pure registered reps is deceptive at best… The fiduciary standard and fiduciary definition issues are hotly debated and divisive topics, and this fi360/AdvisorOne Survey does not help the situation with its misleading interpretation of a statistically invalid sampling of pure registered reps.”
As I wrote last week, it seems to me that despite its relatively small sampling—380 advisors—the fi360/AdvisorOne Survey provides compelling results about the regulation debate due to frequent agreement between RIAs, registered reps and dually registered advisors on key issues. While it’s true that “only 10%” of the responders were, if not “pure” RRs, only registered reps. Yet the survey carefully reported the percentages of each of the three groups in agreement or disagreement of each question, eliminating any confusion about the results. And, at least to my mind, what’s revealed in the agreement between those three groups raises serious questions about how “divisive” the fiduciary issue really is.
Consider the answers to these questions:
Do you believe a uniform fiduciary standard for brokers and advisors that is “no less stringent” than what is currently required of RIAs would help restore investors’ confidence in financial service providers?
65.4% answered “yes”: 71.8% RIA/IAR; 53.3% RR; 59.0% Dually Registered. While it’s true that RRs had the lowest agreement, 53.3% is still a healthy majority (The Obama administration would be more than happy with that number come November).
Do you believe a uniform fiduciary standard for brokers and advisors that is “no less stringent’ than what is currently required of RIAs would raise the credibility of financial service providers?
70.1% answered “yes”: 74.7% RIA/IAR; 63.3% RR; 65.0% Dually Registered. Not a lot of difference here.
Do you believe a fiduciary duty for brokers who provide advice would reduce product and service choice for investors?
64.9% answered “no”: 69.2% RIA/IAR; 50.0% RR; 62.4% Dually Registered. A bigger difference here, but still, a surprising half of RRs don’t believe investor choice would be limited.
Do you believe that advisors are adequately knowledgeable and trained to practice under the fiduciary standard?
74.3% answered “no”: 75.1% RIA/IAR; 76.7% RR; 72.4% Dually Registered; A pretty striking degree of agreement here, as well.
As these figures rather neatly show, the fi360/AdvisorOne Survey does in fact “help the situation” in that it provides real data that challenges the claims by some folks about how divisive an issue a uniform fiduciary standard is: the vast majority of Registered Reps and RIAs are far more in agreement about the positive effects of one standard—and the need for more advisor education—than many would have us believe. Shame on them.