In a small corner of the debate over regulation of financial services stands the registered investment advisor (RIA). The SEC and RIA firms alike acknowledge that the amount of oversight on RIA firms is inadequate. In its “Study on Enhancing Investment Adviser Examinations,” released in January, the SEC said the average exam interval for routine exams is now 11 years—up from seven years in 2009.
The broker-dealer (BD) lobby is using that as part of its push to crush another SEC recommendation, extension of the fiduciary standard of care to brokers who provide advice to investors. But a recent study conducted by AdvisorOne and fi360 indicated that the majority of brokers and RIAs in the field, 67.3%, believe that a “uniform fiduciary standard for brokers and advisors would help regain investors’ confidence.” Moreover, 58% say they “already have a fiduciary relationship with their clients.”
There is a big disconnect between what many BD executives are saying through their lobbyists and representatives in Washington—keep the status quo and preserve the “business model”—and the standard of care with which the majority of brokers in practice want to treat their clients, as indicated in the study above.
For more on this ongoing discussion, please see “Follow the Leaders: The 2011 IA 25,” “House GOP to SEC: Regulator Lacks 'Solid Basis' for Fiduciary Rulemaking,” and“Financial Planning Coalition Tells Congress to Support Fiduciary Duty,” for news, and“Why Is Congress Asking if We Can Afford to Treat Clients Right?” for opinion.
RIAs Prefer Oversight by SEC
The AdvisorOne Top Wealth Managers Quarterly Pulse Survey, Q4 2010, asked participants, (which are all RIA firms), to rank the three recommendations the SEC made to close the oversight gap for RIA firms.
SEC staff made these recommendations to Congress:
“(1) Authorize the Commission to impose user fees on SEC-registered investment advisers to fund their examinations by OCIE;
(2) Authorize one or more SROs to examine, subject to SEC oversight, all SEC registered investment advisers; or