The Securities and Exchange Commission’s exams of investment advisors and investment companies will “take a hit” this year due to the government shutdown and will “undoubtedly” not reach the record 17% exam level of 2018, Dan Kahl, deputy director of the SEC’s Office of Compliance Inspections and Examinations, said in early March.
Kahl, speaking at the IAWatch compliance event in Washington, also told advisors that OCIE will be “working on lots of risk alerts this year,” with a goal to “get as many out as we can.”
A near term alert will focus on Regulation SP and compliance policies, he said. “We’ve done a lot of exam work on Reg SP” and policies and procedures required by the reg, which is related to data security, and “found lots of deficiencies.”
Said Kahl: “I’m using the pulpit now to suggest that you take a look at your Reg SP” policies and procedures that address such things as confidentiality of client information.
Regarding digital assets, which Kahl said “may be touching” some RIA firms, OCIE started a few initiatives last year that will continue this year, and plans a “more in-depth approach this year to get a sense of what’s happening in your shops.”
He noted the digital assets initiative launched by the agency last year to “get a lay of the land” in the advisor space. “We didn’t find much. We found some dalliance” in digital assets by private funds. However, “there’s lots of interest from clients.”
This year, Kahl continued, “we’re going to continue to essentially survey to keep our pulse on digital assets” and advisor accounts.
In terms of senior investors, OCIE will continue to focus on fees and expenses, according to Kahl: “We are very frequently finding problems, not necessarily a fraudulent area, but it’s lack of controls, lack of attention to your billing practices.”
Other areas of focus regarding senior and retail investors include rollovers, recommendations, fund selection, share classes and breakpoints, he said.
Other Developments TD Ameritrade Institutional recently announced plans to boost services to emerging advisory firms: expanding its educational offerings, hosting more learning events and dedicating teams of technology and business consultants to help emerging advisory firms grow more rapidly.
“Firms with less than $100 million in assets tend to have a flatter organization structure, which means they can be more agile and responsive to changing client needs and preferences,” according to Janelle Ward, head of TD Ameritrade Institutional’s emerging advisor accelerator group.
“This enables emerging firms to make decisions on big changes like technology, marketing strategy and client experience faster than their more established peer,” she explained.
These up and coming firms also are hungry for knowledge that helps them grow, and so we see high demand for curated content and engagement with our consultants.”
The latest enhancement is the Education Center’s Emerging Advisors Learning Path, which lays out a series of courses tailored for emerging advisors, such as getting started with technology, growing the business, an in-depth look at TD Ameritrade’s offerings, and research and benchmarking.
Soon, TD Ameritrade Institutional will bring this education and consulting support together through an interactive digital roadmap, an online tool that will provide RIAs easy access to the firm’s suite of tech, practice management and education offerings.
The firm is also increasing its support for facilitating connections between advisors who may be interested in growing via mergers and acquisitions.
“Increasingly, we’re seeing emerging firms join larger firms to accelerate growth, a trend we expect will continue for some time,” Ward said.
TD Ameritrade Institutional said its analysis showed that advisors managing less than $100 million in client assets have been experiencing significant growth, with assets rising by more than 24% annually on average over the past five years. Last year, emerging firms with at least $10 million in assets and more than 24 months on the TD Ameritrade platform delivered 16% growth even as the stock market lost ground.
Ward said emerging advisors on the platform were early adopters of technology that drives greater efficiency and productivity, such as digital account opening, e-signature and electronic statement delivery.
Florida Focus Dynasty Financial Partners said it is relocating its base out of the Big Apple. The firm works with more than 45 RIAs that have placed about $30 billion on its core platform, $15 billion on its turnkey asset-management platform and nearly $1 billion in alternative assets on its investment platform.
Dynasty is set to move to sunny St. Petersburg, Florida, in the second quarter. Its new base will be in downtown St. Pete, about 12 miles south of Raymond James Financial’s headquarters.
“We have spent a year looking for an ideal location … in the heart of a thriving and growing financial services market — and St. Petersburg was a standout on all fronts,” according to President and CEO Shirl Penney.
Less than two weeks after announcing these plans, Dynasty Financial Partners hired an executive away from Raymond James, which has long-term roots in the area. Angela Gingras, who has been with Raymond James for more than 20 years, is set to become Dynasty’s director of operations and will report to the director of investments, Joe Dursi.
Most recently, she was vice president of operations and custody compliance. Dynasty said in a statement it was “not targeting any place or firm in terms of where employees come from in St. Pete. We are posting jobs, and people are applying.”
“Dynasty is focused on building and scaling a fantastic business,” the firm explained. “Our M&A activity is focused on Dynasty doing the buying and we are looking at ways to buy our supply chain and expand our service set for our advisor clients.”
Referring to its neighbor, the firm explained: “Specific to Raymond James, we admire what they have done in the community on the corporate and philanthropic fronts and are pleased to now join them in the St. Pete community.”
Over the next 12 months, the firm expects to add 40 to 50 people in its new location via hiring and tapping staff from its other location. “Most of our corporate growth will occur in our St. Pete HQ location,” the firm said.
For its part, Raymond James said recently that it hired a former Charles Schwab executive to head of its Investment Advisors Division, which works with RIAs. Greg Bruce joins Raymond James from Schwab Advisor Services, where he most recently served as managing director of the Great Lakes Region; he was first hired by Schwab in 2001 and became a business development officer in 2007 and a managing director in 2011.
“Greg has an impressive track record of success in the RIA business,” according to Private Client Group President Scott Curtis. “Adding his background, experience and deep knowledge of this space furthers our commitment to supporting independent RIA firms and providing them with the best tools and resources available.”
Washington Bureau Chief Melanie Waddell can be reached at firstname.lastname@example.org. Reach Michael S. Fischer at email@example.com. Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at firstname.lastname@example.org.