2010 is a landmark year for financial services of all kinds–given ongoing tumult in the economy and markets and proposed legislation that is emanating from Washington. Change may be the watchword for this year and next–and registered investment advisors (RIAs) will feel it along with nearly every other financial services entity. Not since the Investment Advisers act of 1940 and the Supreme Court case, SEC v. Capital Gains Research Bureau, Inc., in 1963, have there been more sweeping changes contemplated.
2010 is a landmark year for financial services of all kinds–given ongoing tumult in the economy and markets and proposed legislation that is emanating from Washington. Change may be the watchword for this year and next–and registered investment advisors (RIAs) will feel it along with nearly every other financial services entity. Not since the Investment Advisers act of 1940 and the Supreme Court case, SEC v. Capital Gains Research Bureau, Inc., in 1963, have there been more sweeping changes contemplated.
Regulatory uncertainty was often cited as one of "three most critical risks to your firm" by the RIAs who participated in Wealth Manager's 2010 Top Wealth Managers annual survey. One fundamental change may be that brokers who provide advice to investors would have to do so under the fiduciary standard, just as RIAs do under the Investment Advisers Act of 1940.
From an investor perspective, this is probably the most important change in the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed by the House on June 30, with the Senate expected to vote after they return from recess on July 12. The legislation "Gives SEC the authority to impose a fiduciary duty on brokers who give investment advice–the advice must be in the best interest of their customers," according to the summary release from the House Financial Services Committee.
How would this change the landscape for RIAs?
Obviously, the fiduciary duty of loyalty to clients already informs the thinking and processes at RIA firms–however, there is every reason to ensure the fiduciary process and procedures and knowledge base are current and are being followed–as firms differentiate themselves further and the SEC and states beef up exams and enforcement. This editor is a member of The Committee for the Fiduciary Standard.
