Products January 12, 2011

Pershing Enhances “Advisor in Transition” Tool

Pershing LLC, a BNY Mellon company, announced upgrades to its Advisor in Transition practice management program. 
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The program allows advisers to analyze five types of business models: form a registered investment adviser (RIA) or join an RIA; form a broker/dealer or join a broker/dealer; or create a hybrid RIA-broker/dealer solution.   

The program enhancements include: 

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  • Real-time firm matching – Advisers can identify firms that are potential matches for their needs.  Provides immediate online matching results, consisting of Pershing-affiliated firms. Advisers can apply their own filters to narrow or broaden their firm list, and have the option to contact their matches directly from the site or choose to have select firms contact them.  
  • “Does It Pay to Switch?” calculator – This segment looks at the economics of advisers moving their business or launching their own firm. The calculator helps advisers analyze the costs of operating under different affiliation models.  It explores overhead comparisons and various compensation models, in addition to important issues such as the cost of legal services and office space.   
  • Interactive business model comparison chart – This resource is a side-by-side comparison of various affiliation models, including a range of features such as payout, product access, marketing, technology, compliance, and more. 
  • Insight and guidance about the transition process – The Advisor in Transition site features success stories, robust content for advisers making a move and access to leading industry experts who are available to answer questions on topics ranging from starting a business to compliance and marketing. 
Compliance January 12, 2011

SEC Reports on B/Ds and Advisers Expected Soon

The Securities and Exchange Commission (SEC) is expected to publish its reports on whether broker/dealers should be held to a fiduciary standard and whether advisers need a self-regulatory organization.
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The Dodd-Frank financial reform law mandated that the SEC investigate these matters.  The first report regarding adviser oversight may come out as early as this Friday, according to Reuters.  Currently, registered investment advisers (RIAs) are regulated by the SEC only, whereas broker/dealers are regulated by the SEC and the Financial Industry Regulatory Authority (FINRA).  Proponents of a self-regulatory group for advisers say that the SEC is stretched too thin to conduct thorough oversight responsibilities.  Advisers, however, oppose a self-regulatory group, saying they prefer the government to step up its oversight of the industry instead of outsourcing it to a private group, reports Reuters. (The SEC has been working on beefing up its oversight of advisers, see “SEC Proposes New Rules for Advisers.”)

As for the debate about whether broker/dealers should be held to a fiduciary standard, rather than current suitability standard (which requires an investment be “suitable” for a client, not necessarily in the clients’ best interest), gets to the bottom of SEC Chairman Mary Schapiro’s repeated concern that “mom-and-pop investors” usually do not know the difference if someone is giving unbiased advice or is trying to sell a lucrative product.  

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One alternative to making broker/dealers work under a fiduciary standard is to require a written disclosure of fees. “What we are hoping as a result of this SEC process is they come up with a practice that allows firms to make the disclosure of the conflict, get a client waiver if the client so desires and then you have a way forward,” said Ira Hammerman, the general counsel at the Securities and Financial Markets Association (SIFMA), according to the report.  Those who oppose the disclosure idea say there are too many loopholes for broker/dealers to hide conflicts of interest.   

Reuters reports that many observers expect the SEC to come up with a new definition of fiduciary duty that finds a balance for broker/dealers and traditional investment advisers.   

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