DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
Even prior to its finalization in April 2016, many brokers have lost sleep thinking about the impending consequences on their practice brought about by the DOL fiduciary rule. And as brokers have concentrated on the effect on their own book of business, some industry-wide consequences have begun to take hold with effects that will trickle down to the individual broker. As the calendar passes six months remaining until full applicability, now is the time for a broker to plan ahead to keep as many options open as possible.
As a recent article in InvestmentNews pointed out, nearly half of all IBDs and RIAs are looking to acquire another firm in the next two years.
Obviously, with increased regulation comes decreased margins. The DOL rule has brought focus to the fees and commissions the industry charges with prime-time shows eviscerating the very premise of having a financial advisor. 401K custodians are now part of class-action lawsuits and some firms are choosing to simply abolish previous payout arrangements. All of these industry-wide effects point to one thing – consolidation. Just this week TD Ameritrade acquired ScottTrade in a $4 billion transaction.
In the event your firm is either a buyer or acquisition target, advisors should think ahead as to how this restructuring may affect your place in the firm. New management may not hold the same values and metrics as the old one does. Assets under management and profitability will always be mainstays but many firms may choose to focus on customer satisfaction and compliance records. If you are an advisor with multiple regulatory disclosures due to customer disputes or tax liens, you may become a target under the new umbrella organization.
In the wake of Wells Fargo, firms will be looking to shy away from anyone having regulatory lightning rods attached to their name. FINRA has shown that customer disputes and tax liens are directly related to “investor harm” which increase compliance costs for the firm as well as increase potential penalties and sanctions. With falling margins, brokers exposing the firm to risk will likely be in the crosshairs. We can confirm this to be true as many recruiters we work with tell us that these sorts of BrokerCheck disclosures can be deal-breakers when a broker jumps ship.
If your eventual transition is voluntarily or you are part of an acquisition, both scenarios are going to subject you to new scrutiny with firm management. The best plan of action is to think ahead and resolve these regulatory issues before they can become a red flag internally. Expunging some disclosures can take up to a year to complete. Call us to discuss how we can clean up your BrokerCheck and CRD now so that you have all of your options available to you when eventual consolidation hits you.
EA, Executive Vice President
3400 Industrial Lane, Unit 10A
Broomfield, CO 80020
This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.