Wealth Management

(New York)

If you are a hybrid BD/RIA, you need to pay attention. FINRA is trying to loosen the strictures in which you might find yourself. In particular, FINRA wants to make changes to its outside business activity rule. It no longer wants to force hybrid B-Ds to have compliance tracking for their RIA businesses. Being legally liable for such businesses can prove a major cost burden. “The motive for taking a percentage payout on the RIAs advisory business will go away”, says one industry insider.

FINSUM: This will certainly be a welcome change for the many hybrid RIAs who deal with the current FINRA rule.

(New York)

The big discount brokerages might be poised for an ugly PR nightmare. In an expose type article, the WSJ has highlighted how big discount brokers like TD Ameritrade and Fidelity hide the fact that their account managers have conflicts of interest. Such managers often tell clients they don’t get paid on commission and therefore don’t have conflicts of interest. Yet in reality they do have incentive pay that biases their advice to steer clients into more expensive products. One former manager from Fidelity comments that “You’re omitting certain facts that the client would probably appreciate understanding before you launch into a sales pitch on why you think this product is better”.

FINSUM: This is definitely something that those who use discount brokerages should be aware of. It remains to be seen what the fallout from this expose might be.


If there was ever exciting news in the fiduciary rule saga, this is it. The Wall Street Journal is reporting that the SEC will deliver a proposed comprehensive fiduciary rule in the second quarter of this year. The challenge of delivering a rule governing all accounts will be very challenging however, even as the SEC says it is fast-tracking development, as it will be bombarded from both sides. One of the directors from the Consumer Federation of America puts it bluntly, “It’s difficult to see how they can come up with a solution that does not land them in court … If they propose a rule we like, industry will sue them. If they give industry a disclosure-based best interest standard that they want, we’ll sue them”.

FINSUM: The SEC is in a tough position, but them coming up with a proposal for a comprehensive rule would be a step in the right direction.

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