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A busy summer for financial services policy changes
Skip Schweiss, 06/17/2019
Managing Director, Retirement Plan Services & Advisor Advocacy
As dozens of advisors and advocates prepared to join the Financial Planning Association for its annual Advocacy Days on June 5 and 6 in our nation’s capital, little did we know our visit
would land on the same day the SEC would meet to vote on its final “Regulation Best Interest (“Reg BI”) rule package.
That gave me the opportunity to sit through the riveting three-hour meeting, which concluded with a 3 to 1 affirmative vote to adopt a package consisting of four main components stretching out over 1,363 pages. Here is what the SEC has approved:
|•||Reg BI – increases the standard of care brokers owe their customers to a “best interest” standard. Brokers now have four obligations here: 1) Duty of disclosure of all material facts about the services; 2) Duty of care, including skill and diligence. Must put their client’s interests ahead of their own; 3) Must establish and enforce policies and procedures that disclose conflicts of interest, and either eliminate or mitigate such conflicts; and 4) Duty of compliance, to establish and enforce policies and procedures designed to comply with the regulation. These regulations will take effect on June 30, 2020.|
|•||Form Client Relationship Summary (CRS) – mandates a new up-front disclosure form for both brokers and RIAs that must include 1) types of clients served and services offered; 2) fees, costs, conflicts of interest and required standard of care (fiduciary vs. best interest); 3) any legal or disciplinary history; and 4) how the investor can learn more about the firm (via hyperlinks, etc.). This provision takes effect on June 30, 2020.|
|•||Investment Advisers Act of 1940 Interpretation – reaffirms an RIA’s responsibilities under the ’40 Act. This takes effect upon publication in the Federal Register.|
|•||Interpretation of the ‘solely incidental’ provision of the ’40 Act – The Investment Advisers Act of 1940 said that brokers can provide advice to their clients without registering as investment advisors, as long as such advice is ‘solely incidental’ to their role as brokers. In the almost 80 years since, that definition has not gotten much attention, so the SEC thought it worth revisiting as part of this release. This takes effect upon publication in the Federal Register.|
Together, these rules and standards represent a watershed moment for RIAs and broker-dealers.
To help our clients get a better understanding of the rules package, TD Ameritrade Institutional will host a webinar on Thursday, July 11, to dive more deeply into these new rules and the implications on brokerage and advice functions. We hope you can join us. Click here to register.
Key issues before Congress
A week after FPA members met with lawmakers, I had an opportunity to return to Washington and participate in the Investment Adviser Association’s (IAA) Advocacy Day on June 13.
Once again, advisors and advocates for the RIA model covered a lot of ground, both physically and in terms of policy.
There is a set of retirement-related bills working their way through Congress this session that advisor groups are particularly focused on and would like to see approved. Among other things, these bills are designed to help more Americans save for their retirement. Specifically, they would:
|•||Allow small businesses to band together to form “multiple employer plans” or “pooled employer plans” for purposes of streamlining cost, administrative overhead, and perhaps some fiduciary responsibility. Only about half of small businesses with fewer than 50 employees sponsor a retirement plan for their employees. If people are not saving for retirement through work, chances are they’re not saving for retirement. We believe this provision can help solve that problem, and we’ve been supportive of this provision for years.|
|•||Allow long-term part-time employees to join their company retirement plan. We feel these workers should have access to their 401(k) at work, so we support this provision.|
|•||Push the Required Minimum Distribution (RMD) age from 70 ½ to 72 starting next year. One of the bills on the Senate side pushes it up further, to 75, by the year 2030. The current RMD age was set decades ago, and today people are living much longer and working longer. That age should be pushed up in line with longer life expectancies and work lives. So we support this.|
|•||As a “pay-for” these positive elements, the bills eliminate the “Stretch IRA” provision, instead allowing up to 10 years for a non-spouse beneficiary to pay the taxes on an inherited IRA. We’ve heard concerns about this change from a small number of RIAs, and are sharing those concerns with elected representatives.|
As of this writing, the “SECURE” Act (Setting Every Community Up for Retirement Enhancement) of 2019 containing these provisions has passed the House by an impressively bipartisan vote of 417-3, and now awaits action in the Senate.
Make your voice heard: Explore the new Advocacy Action Center
We enjoy advocating on your behalf. But in Washington, there’s strength in numbers, so we urge you to take a few minutes to lend your voice to the cause.
Visit our newly redesigned and enhanced Advocacy Action Center at:
There, you can find information on some of these issues, easy-to-locate directories of your elected representatives, customizable template letters you can send them to share your views, and more.
In addition to the retirement bills, TD Ameritrade Institutional is also advocating in these areas:
|•||Restoring the tax deductibility of investment advisory fees for your clients|
|•||Extending the pass-through deduction to RIA firms|
|•||Supporting the Investment Adviser Regulatory Flexibility Improvement Act (HR2436) that would help streamline regulations for most RIA firms that are small businesses|
|•||Modernizing the SEC’s advertising rule to allow for testimonials and more flexibility with social media|
Tell us what you think
Clearly there is a lot going on and plenty to talk about. TD Ameritrade Institutional is honored and proud to represent the interests of RIAs, who as fiduciaries have been putting the interests of their clients first since 1940.
Please follow me on Twitter or contact me via email if you have any questions or comments about these regulatory and legislative issues.
Content provided is for educational purposes only and is not intended to be advice for any firm.
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