Podcast Center
Video Center
Webcasts
Resource Center
Events
January 08, 2013 at 02:53 AM
As we close the books on 2012 and move into 2013, a number of significant issues are looming that will shape financial planners, their practices and the profession in the year to come. Perhaps the most apparent issue is the one that generated the most intensity in 2012 yet was never resoloved: the ongoing debates regarding the implementation of a uniform fiduciary standard for financial advisors, and which regulator will be responsible for increasing the oversight of investment advisors.
These issues—under Dodd-Frank Sections 913 and 914—will become hot topics again in 2013, as the SEC has committed to moving both toward a resolution, and the Department of Labor is also anticipated to (re-)release its own new fiduciary rules for 2013. This will be an intense year for financial advisor regulation.
Beyond what’s on the regulatory horizon, though, two other significant issues loom for 2013. The first is a wave of change in the software and technology that advisors use, as tablets are rapidly becoming so mainstream that already the majority of advisors are using one… and soon the majority of all Americans will be, too. The bad news is that means a great deal of pressure is coming for advisors to improve their software, systems, and practices to accommodate the use of tablet computers. The good news is that this in turn may lead not only to dramatic improvements in the efficiency of the office and the experience for clients, but also that a wider base of tablet users attracts more software developers and providers to innovate and create even more new solutions and improvements.
The final issue for 2013—one that may well turn out to be both the biggest and the one for which advisors are least prepared—is the establishment later this year of health insurance exchanges and the need for clients to choose what health insurance they will purchase for 2014, or pay a penalty.
The sheer numbers involved in implementation of the Patient Protection and Affordable Care Act (PPACA), popularly known as Obamacare, are daunting and almost overwhelming, as there are nearly 50 million uninsured Americans who must by the end of the year go through a process to purchase health insurance. They must also do so from a series of state insurance exchanges, or ones run in the state by the federal government, that don’t even exist yet!
I suspect we will find that when the books are closed on 2013 a year from now, we’ll be stunned by the volume of work that will have been done guiding clients through this health insurance transition period.
In this series of blogs we’ll take a deep dive into each of these three issues. In this first post, we’ll focus on the fiduciary and SRO issues emanating Dodd-Frank.
The SEC’s Fiduciary Rulemaking
2013 is increasingly shaping up to be a major and possibly deciding year for the ongoing debates regarding the application of a uniform fiduciary standard on financial advisors (pursuant to Section 913 of the Dodd-Frank legislation) along with a potential change in the regulatory oversight for investment advisors (the so-called “SRO debate”) for the purposes of increasing the frequency of RIA exams (under Section 914 of Dodd-Frank). The battle lines for the issues have largely been drawn at this point, so it’s more a matter of moving forward with implementing actual rules.
Regarding a uniform fiduciary standard, the SEC’s Section 913 study has been out for two years now, which did recommend that the SEC should move forward with rulemaking. The challenge, however, has been determining exactly how this uniform fiduciary standard should be written (do we need to write a new set of rules to define fiduciary in this context? Can we apply the fiduciary duty as defined by statute and case law under the Investment Advisers Act of 1940?), as well as how widely it should apply (to all registered representatives and investment adviser representatives, or some subset?).
Notably, Section 913(g)(1) of Dodd-Frank does stipulate that the uniform fiduciary standard should be “no less stringer than the standard applicable to investment advisers”, but on the other hand that same section of the legislation also directed the new fiduciary rule to be as business-model neutral as possible. Furthermore, it reads that “the receipt of compensation based on commission or fees shall not, in and of itself, be considered a violation of such standard applied to a broker, dealer, or investment adviser.”
