Wealth Management


It feels like a complete repeat of the DOL’s fiduciary rule. With less than a year to go until implementation (June 2020), the SEC’s new Regulation Best Interest has just entered legal limbo. Perhaps even more worrying than the recent lawsuit from seven states is the fact that leading industry figure Michael Kitces’ firm, XY Planning Network, has just sued the SEC in New York to help block the rule. Kitces is trying to build on the FPA’s legacy of defeating regulators, such as it did in 2005 with the “Merrill Lynch rule”. It is highly unclear what the ultimate outcome of these suits might be, which means brokerages are having trouble committing resources to comply with them.

FINSUM: The chances that this rule gets implemented in its current form seem small, which means it that it is unwise to invest too much into compliance at this point. Everyone still has a bad taste from the money spent complying with the defunct DOL fiduciary rule.

(New York)

RIAs have been growing at breakneck speed for years. Their growth rates are pretty much the envy of everyone else in finance. But to be honest, they may in fact be growing too fast. Take for instance the case of Creative Planning, a Kansas-based RIA that has tripled its client assets to $42 bn since 2016. Alongside the tremendous growth they have also seen trouble, such as an SEC fine for improper radio advertising and another less infraction. The bigger problem for RIAs is that their own internal systems for control, compliance, and governance may be quickly overwhelmed by the growth they are seeing.

FINSUM: RIAs who are growing organically are having trouble keeping up, but the ones growing through acquisition might have even more trouble, especially with keeping costs manageable considering all the overlap.


It honestly seems like it would have happened sooner given all the uproar over how “lenient” the new SEC best interest rule supposedly is. Nonetheless, now it has: the SEC has just had a suit filed against it by no less than seven states and the District of Columbia as part of an effort to block the rule. It is the first lawsuit filed against the new regulation and came from a group that included, California, Delaware, New Mexico, Oregon, Connecticut, Maine, and New York. The plaintiffs argue that the rule "undermines critical consumer protections for retail investors". One top lawyer in the space said “The day the release came out [about Reg BI], we figured the SEC would get sued, and here we are”.

FINSUM: Not much of a surprise here really, except maybe that the suit is coming from a pretty formidable group (and not just some random trade body). Get ready for a long period of legal limbo.

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