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Financial advisor compliance - 3 important tips

Compliance norms change constantly. They change as a business innovates and regulatory priorities and leadership shifts.

Summer 2019 was rife with developments advisors should understand and then consider the 3 action steps below:

1) Fiduciary duty  

On June 5, the SEC announced two major changes with the release of the new Regulation Best Interest (Reg BI) for broker-dealers and Commission Interpretation/Standard of Conduct for Investment Advisers.

Rather than digesting the over 1300 pages, advisors may want to make sure their compliance resource reads Chairman Clayton’s recent speech to understand the changing landscape.

The SEC is focused on protecting individuals’ retirement savings. 

This is an opportune time to differentiate oneself as a fiduciary. As a result of the new requirements, brokers will need to add disclosures and adjust compensation schemes, especially for proprietary products.

Simultaneously, advisors can use this time to communicate a clear message to prospective clients that may be confused by Reg BI; advisors have a fiduciary duty of care and loyalty to their clients. Clients can rest assured their interests are protected when they choose to work with a fiduciary.

2) Conduct an audit 

When was the last time there was an independent review of your privacy controls, conflicts of interest, personal trading controls, business partnerships or marketing review and disclosures? 

Recent SEC guidance with alerts and interpretative guidance make it clear, a reality check this year is more important than ever and will position you for success in 2020. See July SEC Risk Alert - Conflicts, SEC Risk Alert - Network Storage, SEC Risk Alert - Reg SP

The new SEC Interpretation also exhorts advisers to “eliminate or at least expose through full and fair disclosure of all conflicts of interest which might incline an investment adviser - consciously or unconsciously - to render advice which was not disinterested.” Compliance programs might not meet such a comprehensive obligation unless they effectively maintain a conflict of interest ledger that also adjusts to evolving business practices. 

Your competitors are seeking help and your clients, prospects and primary regulator will expect you to have a strong command of the new standards.   

3) Prepare for Form ADV, part 3  

With the new Form ADV Part 3, the Form CRS Relationship Summary, becoming effective next year, advisors should consider getting ahead with their annual review of the Form ADV. They may want to consider an early annual update or best practices pilot of the new form to show their network they are transparent and ready to innovate as needed.

Many larger institutions may struggle with the new two (2) page requirements which, among other things, require disclosure of pricing, conflicts of interest and disciplinary matters. This is an opportunity for advisors to show prospects and clients the benefit of investing within a streamlined advisory model. AdvisorEngine®’s platform is a helpful tool to make sure you manage the delivery of this new form. 


This blog is sponsored by AdvisorEngine Inc. The information, data and opinions in this commentary are as of the publication date, unless otherwise noted, and subject to change. This material is provided for informational purposes only and should not be considered a recommendation to use AdvisorEngine or deemed to be a specific offer to sell or provide, or a specific invitation to apply for, any financial product, instrument or service that may be mentioned. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Opinions and forecasts discussed are those of the author, do not necessarily reflect the views of AdvisorEngine and are subject to change without notice. AdvisorEngine makes no representations as to the accuracy, completeness and validity of any statements made and will not be liable for any errors, omissions or representations. As a technology company, AdvisorEngine provides access to award-winning tools and will be compensated for providing such access. AdvisorEngine does not provide broker-dealer, custodian, investment advice or related investment services.

Beth Haddock

Beth Haddock

Beth Haddock is Managing Partner at Warburton Advisers, a compliance consultancy firm, and author of Triple Bottom-line Compliance – How to Deliver Protection, Productivity and Impact. AdvisorEngine is a client of Warburton Advisers.

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