Each year as we approach the annual update of disclosure documents for investment advisory firms, there seem to be more requirements and new questions to answer. The annual update due by March, 2018, is no exception.
One of the biggest changes is the level of detail required to report the client assets we manage. In the past, Form ADV Part 1 asked for the total of assets under management as of year-end and a general description of the types of clients served by showing a percentage range for clients in various categories.
When things tend to slow down in the summer, with many folks going on
vacation or pursuing family time, their focus is not so much on doing business.
This means that it may be a good time for you to work through some of the more
tedious and oft-neglected tasks that are a part of your own business, at least
when you are not taking family time as well!
Filing and organizing the paper and digital material that flows through
your office on an almost continuous basis is a good way to not only catch up
but also to tip you off to things you may need to follow through on for both
your clients and your business.
The DOL fiduciary rule may – or may not – come into play in some form
this month, depending on several factors which are not yet fully known. But
while we are waiting to see what happens, let’s consider what the benefits and
detriments of the rule might be for the folks who are ostensibly to be helped
by the implementation of the rule.
First, the easy one – the best interests of the investor must be the
priority of the advisor or broker who recommends a particular investment for a
retirement plan account.
We make decisions every day – large and small – and most of the time we
consider various factors and have at least some basis for those decisions. When
we are in business, and particularly where that business is subject to
regulation, there is something we can do about the process that will help us both now and later.
That something is as simple as making a note of the decision we made and a
brief summation of the reasoning.
Well, that takes time and energy you say, and you need to address other
A while ago, we talked about “reading the fine print” and why that may
be important for any consumer to do. With all the discussion in the news about
the proposed DOL fiduciary rule and its pros and cons, another aspect of that
fine print has come to the fore. Rules and regulations are often created to
protect certain groups and in the financial industry, other than protecting the
jobs of the writers of such rules and regulations, the ostensible primary
targets of the protections proposed are the consumers of the financial industry
products and services – our clients.
Social media is at the forefront of activity for many people, whether
for personal, business or other uses. If you are in business or interact with
businesses using social media, it may be helpful – and in some cases is
absolutely necessary – to keep track of what you are posting and sending to
others. Naturally, most of us want to ensure that what we are saying through
social media is appropriate and will not subject us to negative reaction.
However, that can generally be handled simply by thinking through what we are
posting before we do it.
The news headlines and stories, the pictures and video
clips, the online postings and even the tweets of millions are to be found
practically everywhere these days. Whether involving celebrities or politicos,
human interest and tragedy, silly or strange or just plain stupid, information
about us is available and may, as they say, go viral. There is no certainty of
privacy just about anywhere and you are almost certain to know someone who has
received unwanted publicity through social media and its being repeated by the
Among the many compliance concerns facing investment
advisers, one that is getting much more attention these days is how one
addresses what happens to the business and especially its clients when the adviser
is no longer there. Whether an adviser is retiring, becomes disabled, dies or
is required to leave the industry, there is a concern about what happens to the
clients and the continuity of advice available to them. Regulators are looking
more closely to see what advisers have in place and, at a minimum, are
requiring some clear statement in that regard.
Most advisers take time in March to attend to compliance
matters, including the annual update of their disclosures in Form ADV Parts 1
and 2. Another compliance matter, often overlooked, is the performance of the
advisory firm’s annual risk review. One might think that with all the time
spent on compliance matters this is just another burdensome task. However, the
annual risk review can be a very positive experience for the firm and its
The risk review typically is an internal document that is
not required to be filed with the IARD, SEC or other regulator.
We hear a lot about conflicts of interest, usually in the
context of how someone else has used their position for personal benefit as
opposed to the goals of the person or entity for whom they ostensibly are
working. Before condemning others, though, we should probably try to understand
the nature and effects of such conflict as well as how we might address them.
First, how and when does a conflict arise? It might be said
that many conflicts of interest are inherent in the relationship we examine.