Products June 28, 2022

RIA in a Box Launches Continuing Education Program to Support NASAA Rule

The courses, approved by the North American Securities Administration Association, will provide investment advisory representatives with training on best compliance practices, investment products and ethics.

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RIA in a Box, a software-as-a-service provider of compliance, cybersecurity and operational software solutions to the wealth management industry, has announced a new continuing education program for investment advisory representatives.

The program seeks to provide advisers with comprehensive training from an approved provider regarding best compliance practices, investment products and ethics. The program is delivered through an online platform.

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The program is a direct response to the North American Securities Administration Association’s new CE rule, which was adopted in late 2021. The rule requires any investment advisory representative registered under section 404 of the 2002 Act or section 201 of the 1956 Act to complete a set of continuing education requirements through an approved provider over the course of a reporting period. The rule, which is implemented on a state-by-state basis, has been implemented as of late June in Washington, D.C., and eight states: Arkansas, Kentucky, Maryland, Michigan, Mississippi, Nevada, Vermont and Wisconsin.

Under the new CE rule, an IAR who fails to comply with the rule’s requirements by the end of a reporting period will renew as “CE inactive” at the close of the calendar year—until the IAR completes and reports all required IAR continuing education credits. An investment adviser who is CE inactive at the close of the next calendar year is not eligible for IAR registration or renewal of an IAR registration.

In addition to fulfilling the requirements of NASAA’s new CE rule, the program also features a full integration with a service called MyRIACompliance, which allows supervisors to monitor and track their teams’ progress through the courses. Once completed, RIA in a Box will report each IAR’s results directly to the Financial Industry Regulatory Authority.

Data & Research June 27, 2022

2022’s Asset and Wealth Management Landscape So Far

According to a new PwC report, while deal markets have cooled relative to what was seen in 2021, asset and wealth management deal volume has continued at a strong pace in the first half of 2022.

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Investment activity within private markets continues to boom, says a new report from PwC. The rising interest rate environment and extreme volatility in equity markets present challenges, but they may also create new merger and acquisition opportunities for asset and wealth management firms.

Wealth management continues to be the primary driver of deal volume within the asset and wealth management sector, with 224 deals announced in the last 12 months, according to the PwC report, “Asset and wealth management: Deals 2022 midyear outlook.” Aggregators and consolidators of registered investment advisers continue to drive deals.

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The landscape of wealth management advice is changing, says the report, which could spur a shift in the impetus for deals in the subsector. Larger wealth managers continue to look for new and improved technology to digitize their wealth management offerings and deliver remote human advice, particularly as their client base trends toward Millennials and Generation Z.

“As the meme stock boom of 2021 demonstrated, younger demographics seemingly prefer to make their own investment decisions, informed by the use of data and technology providers, rather than through a traditional ‘brick and mortar’ investment adviser,” the report says. “UBS’ announced acquisition of Wealthfront for $1.4 billion is a prime example of this shift. Look for wealthtech to be a key driver of wealth management deal activity in the second half of the year.”

Digital Assets and Crypto Deals

Crypto assets are off significantly from the all-time-high valuations they reached in November 2021, the report says. The ecosystem of exchanges, miners, wallet-providers and brokerages supporting crypto assets—including non-fungible tokens—have also seen a significant correction in valuations.

Despite this, recent statements from governments and regulators have provided more comfort to regulated financial institutions in dealing with an asset class that has historically stoked unease and skepticism, the PwC report says. This has prompted more asset managers and servicers to explore their options with crypto.

Fidelity recently announced that it would soon offer bitcoin as a 401(k) investment option, saying bitcoin represents a long-term investment on future blockchain technology. To remain competitive, says the PwC report, asset managers can no longer ignore this segment of the market. The report projects that the maturing of the crypto space will occur through consolidation of late-stage or mature crypto ecosystem players via acquisitions by larger, traditional asset managers.

The recent erosion in valuations among crypto firms could also be a contributing factor, the report says. This moderation in valuations could make it easier for larger, cash-rich regulated players to explore M&A opportunities in the crypto space. They are most likely to be interested in crypto players with weaker balance sheets, especially players with unique intellectual property or an established position catering to specific customer segments.

SEC Rulemaking

According to PwC, another development to watch more closely in the months ahead is the SEC’s proposed rulemaking to drive changes in retail order routing and payments for order flow, which currently underwrites significant economics for retail brokerage players such as Robinhood and Charles Schwab, market-makers such as Citadel and Virtu and the retail brokerage offerings of SoFi, Block and Ally.

“The SEC plan is likely to require exchanges and other firms to compete more directly to execute trades from retail investors in order to reduce potential conflicts of interest and concentration of volumes among a few market makers,” the report says. “A move towards greater internalization of orders (i.e. brokerage firms fulfilling retail orders from their own inventory) would be one very likely consequence, and consolidation would facilitate both self-clearing and greater order volumes.”

If it goes forward as planned, the report says, one can expect business model disruptions and potential consolidation among several venture or growth-equity-financed players that have built up significant customer bases among new investors, market makers and some of the clearing firms supporting this ecosystem.

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