Cybersecurity Is RIAs’ Biggest Compliance Concern

This is the fifth year in a row they have identified cybersecurity as their No. 1 concern.

For the fifth year in a row, cybersecurity is the biggest compliance concern at registered investment adviser (RIA) firms, with 81% pointing to it as the “hottest” compliance topic and nearly two-thirds saying that their firm has increased compliance testing in this area in the past year. The findings are based on a survey of compliance professionals at 454 investment adviser firms, conducted jointly by the Investment Adviser Association (IAA) and ACA Compliance Group.

“Now in its 13th year, the survey continues to be an invaluable resource for compliance professionals for identifying compliance trends and benchmarking their practices against other firms in the industry,” says IAA President and CEO Karen Barr. “Among the many key takeaways of this year’s survey is that the job of a CCO [chief compliance officer] is becoming more complex and varied, as demonstrated by the wide range of legal and compliance areas CCOs are responsible for, with new ones being added every year.”

RIAs’ second biggest compliance concern is the Securities and Exchange Commission’s (SEC’s) Advertising Rule. Their third biggest concern is custody, followed by issues related to privacy.

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The survey also found that nearly 70% use some form of technology in their compliance program, with the most common usage involving personal trading/code of ethics, gifts and entertainment, political contributions and client guidelines.

Eighty-eight percent test fee calculations, with 55% testing them on a periodic sample basis. As to what they are testing for, 47% are checking that expenses are consistent with advisory contracts or fund offering documents (41%) and that the expenses billed to clients are explicitly disclosed in the firm brochure (45%).

Forty-six percent of firms consider environmental, social and governance (ESG) factors in managing client portfolios.

Sixty-seven percent of firms do not use trading data analytics to monitor trading activity. Among those that do, half use third-party software and the other have use internal trading data surveillance.

The top three concerns related to safeguarding client assets are conducting background and credit checks on access employees (55%), providing custodians with a list of authorized employees (52%) and limiting employees who are authorized to transmit trade orders (51%).

The vast majority of survey respondents (88%) evaluate best execution with respect to the following types of transactions: equities (81%), fixed income (44%), derivatives (18%) and foreign currency transactions (17%).

While 29% of respondents said that their firms do not engage full-service broker/dealers and do not receive proprietary research, 39% do receive proprietary research and 29% receive outside research from independent providers.

The most common controls related to advertising are requiring formal pre-approvals by CCOs (67%) and requiring pre-clearance with interactions with the media (54%).

The majority of survey respondents provide advisory services to individual clients, and most (59%) meet with their clients at least once a year. One-third meet with them each quarter. Virtually all reported that they do not trade in cryptocurrency.

Eighty-three percent of firms conduct cybersecurity assessments. Eighty-percent of firms have adopted pay-to-play policies.

Voya Debuts Holistic Financial Wellness Experience

Voya says participants will be called on to complete an assessment, through which they will receive targeted summaries and web dashboards, along with access to Voya’s “six pillars” programming.

Voya is one of the latest companies to unveil new offerings aimed at enhancing emergency savings among retirement plan participants, reflecting the fact that many participants are struggling with short-term financial needs.

The Financial Wellness Experience, as Voya calls its new feature, will include access to “guidance and personal financial planning services” through the usage of resource centers, where participants will find “educational articles, life-stage tips, planning tools and calculators,” according to the company. Voya says participants will have to complete an assessment, where then they will receive targeted summaries and web dashboards, along with access to Voya’s “six pillars” programming. The pillars are identified as protection; spending and saving; emergency funds; retirement; debt and other savings goals. From there, Voya says, participants can recognize their personal performance within each pillar.

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The wellness tool was implemented after studies showed a growing need for short-term savings funds. A previous Voya Financial Wellness Experience study found about half (49%) of those who completed an online assessment said they “do not have three months of living expenses to cover an emergency,” according to Voya. Additionally, a recent Prudential finding showed 63% of participants reported they do not have the means to pay a $500 emergency, and a past Federal Reserve Report stated 40% of Americans could not afford a $400 emergency expense.

“Saving for retirement is one of the most important financial goals, but it’s never done in a vacuum—and we know that more immediate life events and competing priorities can often impact one’s ability to save,” says Christine Lange, senior vice president, Retirement Digital Solutions for Voya Financial. “As part of our commitment to making a secure financial future possible for all Americans, we believe in a holistic wellness approach—ranging from self-directed digital planning tools to meeting with financial professionals who can offer advice and guidance.”

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