More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
“We did not imagine in our wildest dreams that when we started this it would grow to what it has become,” Brian Hamburger, managing director and founder of compliance consulting firm MarketCounsel, said at the outset of its Member Summit 2012 in Las Vegas on Wednesday. “The level of commitment and collaboration is amazing; everyone is represented, from top advisors to industry thought leaders to service providers, and they're part of the conversation."
The summit, featuring a who’s who of leading RIA firms and industry personalities, is in its fifth year, and began with an announcement from Hamburger (left).
“We have sold our MailBanc messaging compliance service to Global Relay,” Hamburger said, offering no details of the deal. “We started it five years ago out of a desire to fill the need, which did not exist at the time, for enterprise-level messaging compliance at an affordable price. The industry has now matured to a point where we can step aside and continue our focus on RIAs.”
In a somber moment, Hamburger also described the MarketCounsel Foundation, started on Sept. 11, 2002, as a memorial to an employee killed in the attacks. In a desire for a “larger footprint to leave behind” the foundation today focuses on financial education and literacy, as well as helping to encourage diversity within the financial services industry.
Hamburger then moved on to “setting the stage” for the conference by noting three key areas currently affecting RIAs and their affiliated advisors.
The first is the flight to independence, as well as what he referred to as “shades of independence.”
“Shades of independence is simply: what is independence, how do you define it,” Hamburger said. “There are a few things we know including the common platforms and ‘umbrellas’ that are employed. We know that both the size of investment advisory teams, and the assets they manage, is increasing. Lastly, many of these teams believe they are going independent in an effort to run from some of the compliance issues they face. What they don’t realize is that it’s not compliance issues they’re running from, rather risk mitigation issues. Their concerned about the worst broker at their firm and how any trouble he finds will affect them.”
The second area involves the harmonization of broker-dealers and investment advisors, and how the industry as a whole is “growing up.”
“Service providers realize this and are providing great solutions. As far as harmonization, it’s a great word. Who would be against harmonization? But it doesn’t mean to co-exist, rather, how do we make so many of the rules common to both [sides of the industry].”
This last point, he added, is irretrievably linked to the SRO issues, which brought him to his third and final area, which is improving examinations.
“It’s either an SRO for advisors or introducing user fees,” Hamburger concluded. “Our position is that the lesser of two evils is still evil, and we can do better.”