Archive for September, 2013

Brian Hamburger on NextGen recruiting @FinAd_IQ

Monday, September 30th, 2013

In Financial Advisor IQ’s “Tips for Reeling In Gen Y Recruits,” Brian Hamburger discusses the extremely close relationship of Gen Y and the Internet:

Young people born between 1983 and 2000 are the first generation to grow up with the Internet. They like connecting via social media and mobile devices, says Brian Hamburger of MarketCounsel, a firm that advises RIAs on compliance and business strategy, so advisory firms that support digital channels are better positioned to attract recruits. Hamburger adds that young recruits gravitate toward firms that use technology to minimize mundane chores and that embrace innovative approaches to marketing.

Click here to read more.

Brian Hamburger advocates the same disclosure standards for “commission-only” planners @newsfromIN

Thursday, September 26th, 2013

CFP holders who describe themselves as “commission-only” could face the same fate as those who claim to be “fee only.” In InvestmentNews’ “‘Commission-only’ planners could be next group out of pay compliance,” Brian Hamburger, President and CEO of MarketCounsel shares his views regarding the CFP Board’s policy on compensation:

Mr. Hamburger, however, doesn’t see a problem with the CFP Board’s policy on compensation, at least with the larger firms.

Clients using a fee-based wirehouse adviser, for example, contract with the wirehouse, not the adviser, Mr. Hamburger said, and the firm earns commissions and other revenue from the client, which should be disclosed as both fee and commission.

Click here to read more.

FINRA Files Recruitment Compensation Proposal With SEC

Thursday, September 19th, 2013

FINRA announced that its Board of Governors approved a proposal requiring brokers to disclose recruitment compensation paid to them as an incentive to move to a new firm.  The proposal needs to be submitted to the SEC for review and approval.

The rule was approved mostly as first proposed.  Some of the key provisions are:

  • Brokers need to disclose their recruitment compensation to any customers that choose to follow them to their new firm for a full year.
  • The disclosure is required for compensation of $100,000 or more and is disclosed in ranges (such as $100,000 to $500,000) as opposed to specific amounts.
  • The requirement applies to most standard types of recruitment compensation including signing bonuses, up-front or back-end bonuses, loans (such as forgivable promissory notes), accelerated payouts, and transition assistance.
  • The requirement also applies to future payments (trade-based or asset-based) contingent on performance criteria.
  • Firms are required to report to FINRA significant increases in total compensation paid to a newly recruited representative during the fist year.
  • Firms are required to disclose whether costs would accrue if a customer decides to transfer assets to the new firm and that certain assets may not be transferable.

MarketCounsel expressed reservations to certain aspects of this proposal to FINRA.  The biggest concern, which remains unaddressed is the clear bias against brokers transitioning versus those receiving significant “retention bonuses.”

Chairman and CEO Richard Ketchum stated that the proposal is about “making sure the customer can make a fully informed decision to follow a broker to a new firm and understand the costs associated with transferring his or her account. This proposal reflects our commitment to transparency and investor protection.”  If transparency and protection was really FINRA’s goal, retention bonuses should also be disclosed.  The conflicts that exist with a representative possibly moving to a new firm for bonus money are the same as those for representatives deciding not to move for the same reason.

SEC Approves Registration Rules for Municipal Advisors

Thursday, September 19th, 2013

A rule that has been discussed for years has finally been approved.  The SEC voted unanimously to adopt rules establishing a permanent registration regime for municipal advisors.  In a release announcing the rule, the SEC explained that prior to the Dodd-Frank Act, municipal advisors (those that provided advice to state and local governments on the issuance of their bonds) did not have to register in any capacity.  Therefore, issuers were unaware of conflicts and there was no regulatory oversight.  The new rule requires a municipal advisors to permanently register with the SEC if it provides advice on the issuance of municipal securities or about certain “investment strategies” or municipal derivatives.

Hopefully this rule will help shed light on the entire municipal securities process.  If issuers get better, more transparent advice, that superior relationship could help investment advisers and other investors get better information for their investment decision process.

Brian Hamburger shares why Millennials and financial planning aren’t mixing @newsfromIN

Wednesday, September 18th, 2013

Despite all that the financial planning industry has been doing to boost its attractiveness, Millenials aren’t buying it. In InvestmentNews’ “Why Millennials are avoiding financial planning as a career,” Brian Hamburger, President and CEO of MarketCounsel shares the tech-truth:

Brian Hamburger…said top talent is attracted to other professions because they are perceived as being more tech savvy. He said financial planning is seen as having outdated business models.

“The next generation has a very clear perspective about how they want to interact and communicate with clients,” he said, noting that texts, emails and tweets are quite different from the periodic letters financial clients have come to expect from their advisers. “It seems like we’re behind.”

Click here to read more.

SEC Charges 23 Firms with Short Selling Violations

Tuesday, September 17th, 2013

On the morning of September 17, anyone that receives emails from the SEC announcing enforcement news was flooded with emails about Rule 105 of Regulation M (“Rule 105″).  The SEC announced enforcement actions against 23 firms for short selling violations of Rule 105.  Rule 105 prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the purchase of that same security through the offering.  The rule applies regardless of the trader’s intent.  The goal is to help prevent short selling that can reduce offering proceeds received by companies by artificially depressing the market price shortly before the company prices its public offering.

The SEC’s National Examination Program simultaneously issued a risk alert regarding non-compliance with Rule 105.  The risk alert highlights observations by SEC examiners focusing on Rule 105 compliance issues as well as corrective actions that some firms proactively have taken to remedy concerns.

According to the SEC, the enforcement actions are being settled by 22 of the 23 firms charged, resulting in more than $14.4 million in monetary sanctions.  Each settlement involved disgorgement, prejudgment interest and a penalty.  The firms are primarily broker-dealers, investment advisers to private funds, or pension plans.  It does not appear that any of the firms were managing client assets separately as investment advisers.

In the risk alert, the SEC said that it has collected in excess of $42 million for violations of Rule 105 since January 2010.  Therefore, the September 17 settlements alone make up 34% of the penalties over a 3.75 year period, which would tend to show a focus by the agency.

Brian Hamburger on the CFP Board’s expanded disciplinary sanctions in @finplan

Monday, September 16th, 2013

Brian Hamburger, President and CEO of MarketCounsel, connected with Financial Planning Magazine to discuss the CFP Board’s disciplinary process which has been under scrutiny since Alan Goldfarb and Jeffrey and Kimberly Camarda’s public sanctions for compensation disclosure violations.

“If the paradigm is now shifting, whereby there is public humiliation, then I think that that does change things,” Hamburger says. “I think that people have to rethink … whether what they are getting out of that [CFP] mark is worth the risk of that type of humiliation because it’s damning, let’s face it. The SEC knows that. FINRA knows that.”

Click here to read more.

Brian Hamburger pokes holes in Finra’s controversial broker comp rule @newsfromIN

Monday, September 16th, 2013

On Finra’s agenda for September 19, a rule that would force brokers to reveal recruiting incentives to clients is up for discussion. In InvestmentNews’ “Changes expected as Finra weighs controversial broker-comp rule,” Brian Hamburger offers up his thoughts:

“The way this has been drafted is silly,” said Brian Hamburger, president and chief executive of MarketCounsel LLC, a business and regulatory compliance consulting firm. “To only disclose the amount in recruiting deals takes off the hook those firms that are paying obscene amounts in retention deals. To only disclose this narrow subset of compensation practices is completely misleading.”

Click here to read more.

Gary Davis, Jr. suggests testing fee calculations with @IAWatch

Wednesday, September 11th, 2013

In this week’s installment of IAWeek, Gary Davis Jr. discusses fee calculation testing in “Calculated risks: Freedom to charge fees with ample opportunity to find trouble.”

You might as well sample your fee calculations because the SEC will, notes Gary Davis Jr., VP, practice management with MarketCounsel in Englewood, N.J. Examiners “will manually calculate the fees” firms charge, he says. If they find errors, “they will make you pay that money back to the client,” he adds. Plus, your risk rating will rise, increasing the chance of a return visit by examiners.

Click here to read more.

Brian Hamburger talks “back to business” development with @RIABiz

Thursday, September 5th, 2013

When Brian Hamburger, President and Chief Executive Officer at MarketCounsel was asked to discuss Ryan Marcus’ departure, he had nothing but a positive outlook.

‘Hamburger realized that although he would hate to see Marcus leave, one advantage of the change is that it would allow him, Hamburger, to get back into the business development end of his firm. “This is not a short-term move,” Hamburger says. “For me, this is getting back into something I’m very passionate about.”’

Click here to read more.