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.
- 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.
“It’s almost like we’re the Un-cola,” Barry Schmidt said of the practice management program he leads. “So many people say, ‘the independent advisor has to be a CEO,’ but that’s not true; their skill set, what brought them in to the advisory business, might not necessarily fit with that role.”
For that reason, Schmidt (left), the vice president of practice management with Cambridge Investment Research, based in Fairfield, Iowa, takes a completely customized approach with coaching issues.
“It can be one working with [many] advisors, or one-on-one,” he said in an interview at the firm’s Women Advisors Forum in Denver, Colo. on Thursday. “It is more labor intensive to provide one-on-one help, but we’ll do it. If someone wants help in their office for an entire month, that’s a different conversation, but one we will gladly have.”
While a number of independent broker-dealers charge a nominal fee for practice management help—if only so the advisor has ‘skin in the game’—Schmidt takes a different approach.
“There’s no fee, but they sign a commitment contract up front,” he said. “If, for instance, they sign a year-long commitment and they quit after six months, we charge a back-end load.”
The No. 1 request he’s currently receiving from the advisors with whom he works? How to maintain a better work-life balance.
“What they tell me,” he said, “is that they want to increase revenue (as everyone does), but they don’t want to ruin their life in doing so.”
Another major issue with advisors, Schmidt says, involves succession planning. Although a worry for executives at the home office level for some time, advisors are now asking for it.
“We’ve instituted our ‘Continuity Express Program,’ which is a relatively new initiative of which advisors are gaining awareness,” he said. “In a catastrophic event, Cambridge will come in and support the practice through our S.W.A.T team, which is an acronym for 'special wealth advisor team.' We ask some pretty intrusive upfront questions, like where the checkbook is located; if they have a safe, where the key is kept; and, how can we gain access to the office?”
Schmidt related the story of a 38-year-old advisor who was seriously injured recently in a waterskiing accident to explain the two main components of succession planning: continuity planning and long-term planning.
“Continuity planning is like catastrophic insurance,” he said. “What happens if I get hit by bus No. 4; bam, one day it just happens? Conversely, long-term planning is really where the practice management portion takes place. It’s creating a vision of the future, one the advisor can see and take ownership of.”
Schmidt concluded that he would “love to make the ‘Continuity Express Program’ part of our onboarding process," as it would help stave off many potential problems, “but these are independent advisors, and it’s very difficult to tell them they have to do anything.”