Products September 10, 2018

Wagner Building Database for New Adviser Search Service

Advisers interested in participating are called on to submit info electronically.

Reported by

The Wagner Law Group has announced the launch of a new adviser search consulting service. 

As the firm points out, the fiduciary responsibility of Employee Retirement Income Security Act (ERISA)-governed retirement plan sponsors to select, monitor and terminate the investment choices available to plan participants is enormous, and has led plan sponsors to seek assistance from outside investment advisers.

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“Retaining an investment adviser to choose plan investments, however, does not absolve retirement plan sponsors from the fiduciary duty related to plan investments, and, in and of itself, is an action that must meet ERISA’s stringent fiduciary standards,” observes Marcia Wagner, managing director of the Wagner Law Group.

Recognizing that litigation involving claims of breach of ERISA fiduciary duty continues to grow, the firm’s adviser search consulting service is tailored to assist retirement plan sponsors with the search for and selection of appropriate investment advisers in a manner designed to ensure compliance with ERISA fiduciary obligations.

Tom Clark, ERISA attorney and partner with the firm, explains that Wagner Law Group is already at work “building a pool of qualified advisers.”

“As you can imagine, many advisers have reached out so far,” he explains. “Anyone interested will be sent a short request for information document electronically that efficiently captures information.”

“As we watch ERISA lawsuits in this realm continue to mount, we feel it is our obligation to help our clients with the crucial process of selecting a proper plan investment adviser,” Wagner adds.

The Wagner Law Group’s adviser search consulting program consists of three stages. First is the analysis of plan needs, wherein plan officials are surveyed “to identify the necessary services to be provided and the desired adviser qualities.” The universe of advisers is narrowed, the firm explains, and a request for proposal (RFP) for possible candidates is developed. Candidates may include pre-screened advisers and/or those requested by the client, according to the firm.

Next is the RFP process. According to Wagner Law Group, candidates receive the RFP electronically and are asked to provide documents such as a sample investment monitoring report. Responses are analyzed and between two and four finalists are identified.

Finally comes the adviser selection step. As the firm explains, finalists all receive an additional RFP electronically and are asked for more in-depth information and additional documents such as copies of applicable insurance policies. Appropriate finalists are asked to make an in-person presentation to the client.

The Wagner Law Group acts as a fiduciary in recommending finalists and assists in the negotiation and execution of the service agreement. Those interested in the service are encouraged to reach out to the law firm directly.

In Practice September 7, 2018

Western Region Sees Strongest Adviser Growth

Of the 805,623 non-clerical employees of SEC-registered firms, more than half spend the bulk of their time providing investment advisory services or research.

Reported by

The Investment Adviser Association (IAA) and National Regulatory Services (NRS) released their 18th annual “Evolution Revolution” report, highlighting robust growth in the investment advisory industry.

According to the report, the universe of Securities and Exchange Commission (SEC) registered investment advisers continues to grow at a steady pace, creating a record number of investment advisory positions.

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“In 2018, SEC registered advisers reported a total of 805,623 non-clerical employees,” the report explains. “This is up 3.6% since 2017. Of these employees, more than half (415,971) provide investment advisory services (including research), a healthy increase of over 15,000 since 2017.”

When considered on a regional basis, the report shows all regions in the U.S. experienced an increase in advisers, led by a 5.4% year-over-year increase in the West. Although the Eastern U.S. did experience growth, its 1.8% rate of increase was about half that of the Midwest at 3.9% and the South at 4.4%, “perhaps foreshadowing the impending transition away from the longstanding numerical dominance of East Coast-based advisers.”

According to the report, assets managed by advisers grew 16.7% from $70.7 trillion in 2017 to $82.5 trillion this year. Important to note, this growth is “likely primarily a function of strong stock market performance in the past year.”

“While all SEC-registered advisers are fiduciaries providing investment advice to clients, the industry is highly diverse in size and type of firms, services offered and clients served,” the report explains. “The vast majority of SEC-registered investment advisers are small businesses. Small businesses are the core of the investment adviser industry.”

As the report lays out, in 2018, more than half (56.8%) of advisory firms reported that they employ 10 or fewer non-clerical employees, and 87.5% reported employing 50 or fewer individuals. At the opposite end of the spectrum, the largest 108 firms employ 52.5% of all non-clerical employees in the entire industry.

According to IAA and NRS, registered investment companies ($29.0 trillion) and private investment vehicles ($19.9 trillion) together represent $48.9 trillion, or nearly 60%, of the total assets under advisement. There is some evidence that private equity funds are becoming more prevalent that hedge funds.

Also notably, the report shows nearly three-quarters of advisers have assets attributable to separately managed accounts, but relatively few advisers engage in borrowing or derivative transactions in these separate accounts.

“It is more common for smaller advisers to invest 100% of their clients’ separately managed account assets in a single asset type than it is for larger advisers,” the report explains.

The full 2018 Evolution Revolution report is available on the IAA website  and on the NRS website.

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