In addition to volatility in the financial markets, financial advisors have to worry about other threats to their business including regulations coming out of Washington and cyber attacks. Today’s guest, Skip Schweiss, keeps a close eye on all these non-market related issues and we go through the list and discuss simple steps you can take to mitigate the risks.
Skip is responsible for TD Ameritrade Institutional’s Retirement Plan Services platform. He is also the Managing Director of Advisor Advocacy & Industry Affairs.
And as I’ve witnessed firsthand (see What I learned about our industry’s toughness, endurance and character across four peaks, 28 miles and 7,500 vertical feet in Aspen written by Eric Clarke of Orion Advisor,) Skip is a skilled and avid outdoorsman. In his spare time, he climbed all 54 of Colorado’s 14,000-foot mountains.
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Five Quotes From Skip Schweiss…
- The Conflict of Interest Rule could dramatically change how you get paid on managing IRAs. With approximately 10,000 Baby Boomers retiring each day, the Department of Labor “figured it’s time to impose some higher standards here” to protect the nest egg of these retirees. In fact, the department, “originally proposed back in 2010 to impose some version of ERISA on IRA accounts.” After years of back and forth, we may soon see a finalized regulation that says, “you can no longer receive conflicted or unequal compensation that could vary depending on what investments you recommend to a small 401k or an IRA account.” The bottom line is, your compensation and business model may need to change once this rule goes into effect.
- Robo-advisors get a break on this Conflict of Interest rule. Why? “The department specifically addressed so-called robo-advisors, and they exempted them from these regulation. They said most of those operate as RIAs, so they’re not making variable compensation through commissions. The department was interested in seeing a new advice channel or innovation in the marketplace flourish.”
- This potential Conflict of Interest regulation is a big deal. “This is not just about an impact on brokerage firms and insurance companies,” said Skip. “If you’re advising clients to rollover money, and I suspect most advisors are, it’s going to impact you and potentially have a pretty significant compliance burden on your firm.”
- Cyber security is a weakness many advisors need to shore up. “Advisors really need to be paying attention to this,” said Skip. “We’re seeing and hearing increasingly, even in our own business, where bad guys are hacking into a client’s e-mail account and then e-mailing the advisor and saying, ‘What’s my balance in my account?’ and ‘Oh, please wire $100,000 to this bank in …’” Skip shared some simple steps advisors can take to protect themselves and their clients from this cyber threat.
- If you’re outsourcing your compliance, look out. The SEC is concerned that outsourcing your compliance to a third-party leaves you vulnerable to a cookie-cutter approach that may not meet the specific needs of your business. While the SEC didn’t explicitly say, “don’t do it,” they did issue a “risk alert” and “created a pretty good roadmap to say, ‘Here’s what we think you should do and here’s some practices we don’t think are the best.’”
Skip Schweiss on going where the money is…
Bad guys don’t have to rob banks anymore; they can sit on their couch and look for ways to access systems where they can extract money.
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