WASHINGTON — Insurance sales representatives and registered representatives of broker-dealers now play a “significant role” in many registered investment adviser (RIA) firms, according to an analysis of new Securities and Exchange Commission data.

Related: How the final DOL fiduciary rule will impact advisors

The report indicates that many RIAs have decided to supplement their fee compensation with commission compensation, according to officials of the Institute for the Fiduciary Standard, which analyzed the data.

The data was gleaned from filings by RIAs on Securities and Exchange Commission Form ADV, which requires them to disclose their compensation, conflicts of interest information, and the registrations of their employees.

Institute officials acknowledge that an analysis of the data raises the question of what impact the emerging sales efforts of RIAs may have on their ability to provide objective advice to clients.

The report was released as part of the Institute’s “Fiduciary September,”  the Institute’s annual month-long special recognition of the vital role of fiduciary duties for investors and the capital markets.

“What we do not know from the data is how prevalent in any particular firm is commission compensation, and how well the firm manages these conflicts of interest, or whether the commission compensation earned is credited back to the client,” Institute officials said. “What we do know is that firms that choose not to have advisors who are also registered reps or insurance reps also do not have these conflicts to address.”

The report indicated that two percent of the RIAs and 89 percent of the large banks sell securities from advisory clients or to advisory clients.

Knut A. Rostad, president and founder of the Institiute, and Brian Hamburger, of Market Counsel, and the Institute’s Best Practices Board general counsel, said one finding of the analysis is that RIAs, in pursuit of growth, appear to be more willing to accept conflicts of interest.

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Before 2008, RIAs appeared willing to “walk away” from growing their business in order to reduce conflicts of interest, the two said. Post-2008, “growth rates are higher in firms with multiple revenue streams,” they said.

They noted that a growing number of firms are willing to offer products that come with substantial conflicts of interests.

Rostad indicated that the emerging view is that the SEC is now emphasizing that it will accept these potential conflicts if they are disclosed. “The SEC is definitely moving in that direction on the RIA side,” Rostad said.

Hamburger said the trend is that RIAs “want ability to do everything.” He added that RIAs appear to be acknowledging that, “there is a cost to do everything, of providing greater services,” and that one of those costs is higher Director & Officer liability insurance.

He said the SEC is now seeking more data aimed at givin the agency the ability to better access risks and conduct examinations.

Hamburger also noted that, “Customers are not making decisions to hire an advisor based on the disclosures provided to them,” but they should certainly do so. “This shows that customers should be asking questions based on the growing conflicts.”

The study also found that “proprietary products” play a larger role in RIA firms than does “principle trading.”

Almost one in five RIA firms report recommending proprietary products, the study found.

“This said, what we do not know from this data is how prevalent in these firms or any one any one particular firm is commission compensation from proprietary products, and how well the firm manages the inherent conflicts of interest in these products,” the report said. “What we do know is that proprietary products create significant conflicts of interest and firms that choose not to engage in proprietary products do not have the associated conflicts of interest.”

Related:

5 things to know about selling annuities under the DOL fiduciary rule

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