Displaying items by tag: RIAs

(New York)

RIAs all over the country have been quite confused over the last couple of weeks. Ever since the SEC’s infamous change from “and” to “or” regarding fiduciary duty and a new ban on the use of the word for certain advisors, RIAs have been unsure about whether they are allowed to called themselves “fiduciaries”. On the one hand, the ban of the term’s use for certain groups made it seem like they could not use it, while on the other the technical definition of their duty had changed such that they no longer need to be fiduciaries to in order to comply with the SEC’s rules on defining an RIA. The SEC cleared up confusion late last week, however, saying that RIAs could continue to call themselves fiduciaries as the ban on use of the word does not apply to them, and nothing has changed to limit their use of the term.

FINSUM: While many RIAs are unhappy with the recent changes because of how they will water down the RIA brand, at least the SEC was very quick to clear up this confusion.

(Washington)

RIAs need to ready themselves for an onslaught of broker marketing. Changes to the SEC’s rules on fiduciary advice means brokers can now say that they put client interests ahead of their own. This is leading industry experts to expect a marketing bonanza that is expected to help brokers capture market share back from RIAs, who are having their niche diluted by the changing rules. Accordingly, RIAs will need to recraft their narrative, changing marketing language in order to re-differentiate themselves from brokers.

FINSUM: The big loser in the new regulatory push has been RIAs, as they have essentially had their turf artificially eaten away from some shifts in language by the SEC. That said, they have been gaining market share for years, so are in a better position to begin with.

(Washington)

RIAs were shocked and stunned by the SEC’s new Best Interest rule. The reason why comes down to one word. By substituting an “and” for an “or”, the SEC basically dissolved the necessity for fiduciary duty of RIAs. Fiduciary duty until now was defined by advisors having to avoid all conflicts of interest AND make a full disclosure of all material conflicts of interest. Now the rule will have an “or” instead of an and, meaning RIAs could abide by the rule simply through disclosure, eliminating a key tenet of fiduciary duty. One industry insider commented bluntly, “It guts the RIA industry”, continuing “RIAs are not fiduciaries anymore”.

FINSUM: This is a big deal for the RIA business because it means a whole slew of new advisors can call themselves RIAs but not meet the standard and reputation that has been cultivated over decades.

(New York)

Wirehouse business may have gotten a boost from the demise of the fiduciary rule, but its decline has been uninterrupted for years. New data from 2018 is in and shows that wirehouses shed 5.7% of their client assets during the year. Advisor headcount also dropped by 403 advisors, brining the total to 54,030. According to the study, put out by Aite Group, “Wirehouses have steadily ceded market share from 2008 to 2018 … The segment has lost a total of 10 percentage points over that time period. As wirehouses continue to rationalize the size of clients they serve in advisory relationships, they also continue to see an outflow of advisors into other industry channels”.

FINSUM: RIAs and IBDs have been taking market share from wirehouses for years and the reasons why are obvious—better selling points for clients and better compensation. We think it is also a product of the demographics of the industry—as advisors get more senior and established the economics of going independent become more alluring.

(New York)

Life insurance and annuities have always been a strange grey area for RIAs. They tend to be quite high commission products, a fact which obviously does not blend well with the no-commission, fiduciary mandate. This has left RIAs in an odd position. However, a new and quick growing company, DPL Financial, is now offering a solution. The company serves as an insurance network helping RIAs utilize products from the space. It works with providers of insurance products to help them tailor their offering for RIAs, such as making products commission-free. DPL has already signed up 200 RIAs to use its service. In an example of what they do, DPL’s founder and CEO, David Lau, commented on signing up Jackson National Life Insurance recently, saying “Jackson has long been a market leader in variable annuities, and we are excited to be their partner in launching their fee-based products to the independent RIA market”.

FINSUM: This seems like a very smart and useful approach and the utility for RIAs appears clear. It is obvious they are solving a big problem given their pace of growth.