Archive for April, 2014

MarketCounsel Comments to SEC on FINRA’s Proposed Recruitment Compensation Rule

Wednesday, April 23rd, 2014

As previously discussed, FINRA submitted a rule proposal to the SEC which would require the disclosure of certain recruitment compensation received by brokers. MarketCounsel has been consistent in praising the idea of conflict disclosures, but we have taken issue with some parts of the rule as well as areas that we feel are missing.

In particular, we took issue with:  i) the inconsistency of retention bonuses not being disclosed; ii) certain terms of a bonus, including restrictive covenants, not being disclosed; and iii) the advantage provided to larger institutions by the rule favoring a status quo on broker employment.  The full text of our letter can be found here.

Dan Bernstein Zeroes in on Improving Cybersecurity: Policies and Procedures @joycehanson @newsfromIN

Tuesday, April 22nd, 2014

The SEC has recently identified 28 specific cybersecurity risks, and wants to know how firms are managing these risks. Before any additional guidance and rulemaking from the regulator arises, advisers can use this as an opportunity to become more aware of their own processes. @newsfromIN has come up with 10 cybersecurity tips for advisers, and Dan Bernstein zeroes in on knowing your own policies and procedures:

“The point of all these policies and procedures,” said Daniel Bernstein, chief knowledge officer at MarketCounsel, “is to mitigate exposure to cybersecurity risks.” “For example,” he said, “advisory firms often fail to train staff routinely and consistently about putting a data protection plan into place. That plan should require portable storage devices to be encrypted. An obstacle: employees who walk out of the office door with unencrypted flash drives and mobile phones that can be lost or stolen.”

“It’s often there in the policies and procedures manual, but, ‘Hey, we’re dealing with everyday business life, and we just didn’t get around to that,’” Mr. Bernstein said. “One of the best solutions is you just don’t let people take that data away on their mobile devices. Do they really need a customer’s Social Security number on their flash drive?”

Click here to read more.

Hold On to Your “Breaches!” Dan Bernstein on the SEC’s New Cybersecurity Movement @MarkSchoeff @newsfromIN

Friday, April 18th, 2014

The SEC posted a risk alert on Tuesday that outlines the areas it will assess in upcoming examinations of RIAs and broker-dealers regarding cybersecurity protection. The document contains requests ranging from cybersecurity governance and network and client information protection to firm’s experiences with security breaches. Dan Bernstein offers his thoughts on the SEC’s movement to check adviser’s safeguards:

“Even though the SEC is going to examine only a handful of firms, it is using the sweep to send a message about what it views as best practices,” said Dan Bernstein, director of research and development at MarketCounsel, a compliance consulting firm.

“The result is not going to be a specific set of instructions to follow. Cybersecurity safeguards will depend on how much access firms have to client information and how they manage it,” Mr. Bernstein said.

“It’s going to be facts- and circumstances-based,” Mr. Bernstein said. “Some firms will need more protections than others. The advisers that have a strong privacy policy, a data-protection plan, an identity theft program and a business continuity plan will be in strong shape.”

Click here to read more.

Corey Kupfer on the Industry Wide Gaps of Succession Planning @PrivateAssetMgt

Friday, April 18th, 2014

As the wealth management industry approaches retirement age, the idea behind succession planning continues to bring the stress of inadequate solutions to the space. Corey Kupfer offers his thoughts on the trends and succession planning options that are available to advisors given different timelines:

Corey Kupfer, director of Entrepreneur Services at consulting firm MarketCounsel, said that “on top of clients being advisors’ primary concern “the industry has done a poor job of bringing in, training up and hiring younger advisors”

“Given enough time is available before retirement, some may hire someone for internal succession, ensuring it’s the right fit, taking time to properly train and, over time, transition the client relationships,” said Kupfer. He said “other advisors find it’s a better fit to look to acquire firms or to be acquired—traditionally or as a tuck-in—to solve the succession dilemma.”

“If only a year of two of retirement planning is a viable timeline—perhaps unexpected health issues became a reality and retirement was forced sooner than expected—then the options become severely limited,” according to Kupfer.

“If you’re down to a year or two and you’re down to nothing, external sale is one of the only options you have left,” Kupfer said. And while many would prefer to retire sooner rather than later, he added that “there is largely no inherent limit as to when you need to stop working. We’re not loading trucks here. [Wealth management] is a profession where advisors can work well into their 70s.”

Click here to read more.

Hal Lambert on how MarketCounsel, @DynastyFP and @Pershing Led Him to Independence @echrisl @FinAd_IQ

Wednesday, April 16th, 2014

Recently-minted independent advisor, Hal Lambert left Credit Suisse in October of 2013 to launch his RIA, Point Bridge Capital. Hal sat down with the Financial Times’ @FinAd_IQ to discuss the reasoning behind his move and how it has impacted his business today. Hal offered some kind words on having @MarketCounsel, @DynastyFP and @Pershing on his team:

“We had dedicated teams with Pershing, Dynasty Financial Partners and MarketCounsel, who advised us on how to do the transition and not be in violation of agreements with the previous firm. They’re also there to help get the right filings done, all the operational things the big firms take care of on behalf of advisors.”

“Strategic partners like Dynasty and MarketCounsel can look at your book of business and see if it’s right for you. They enabled us, on the day we left, to begin operating immediately. That’s important. You don’t want to leave one firm and spend five months waiting to get working again.”

And for that, we thank him.  Click here to read more.

SEC Brings Another Conflicts of Interest Case Says Dan Bernstein to @masonbraswell @newsfromIN

Tuesday, April 15th, 2014

The SEC has charged San Diego-based firm, Total Wealth Management, Inc. with breach of fiduciary duty and fraud. According to the SEC, the firm and its executives were receiving undisclosed kickbacks for recommending investments to clients and concealing revenue-sharing fees they received. Dan Bernstein sees this issue as just another case of undisclosed conflicts of interest and notes that there are other mitigating factors.  He offers his insight on revenue-sharing agreements:

Dan Bernstein, a director of research and development at MarketCounsel, said that “revenue-sharing agreements are not always illegal, but can become an issue if they are intentionally covered up.”

“If these individuals were able to show that these revenue-sharing agreements were in the best interest of clients and they properly disclosed the revenue sharing, this may well have not been an issue,” he said.

Click here to read more.

Is that You? Brian Hamburger on Protecting Your Clients from Fraud @VeronicaDagher @WSJ

Tuesday, April 15th, 2014

With the convergence of rapid communications, emerging technology, and the desire to deliver a service model rooted in familiarity, it’s no surprise that advisers are targets for fraud. Brian Hamburger urges advisers not to be embarrassed to ask their clients to verify their identity:

“Clients can be sensitive when they get questions about their requests, as it feels like they’re having to ask twice. But firms shouldn’t be embarrassed to seek proof that a transfer request is genuine,” says Brian Hamburger, chief executive of MarketCounsel, a firm that helps advisers comply with financial regulations.

“Explain that emails are easily and frequently hacked and you’re trying to protect them,” he says.

Click here to read more.

ISSUE: Heartbleed… What Should Advisers Know

Tuesday, April 15th, 2014

You have probably read a lot about the Heartbleed Bug.  There is a lot available that explains the complicated technology flaws that created this problem.  What it comes down to, however, is that the encryption software used to protect more than half of the internet’s traffic has a vulnerability that can be used to steal information from the servers where data is stored.

Is this the 2014 version of “Y2K” which predicted the world was going to go black at midnight on January 1, 2000?  No, this is a real threat and one that advisers must be aware of since it is possible that client data can be breached.  Many major internet sites including Google, Facebook and the US Postal Service were affected by this bug.  With the SEC’s recent focus on Cybersecurity, this is an opportunity to implement and test your privacy policy and data protection plan.

You should first close any potential vulnerabilities.  This includes your own systems and those of third-party sites that may store your data, especially those that have client data.  Most big sites affected by the bug have fixed the vulnerability, but you should confirm such and expect to be asked to change your password the next time you log on.  You may also want to inform personnel to stay aware of phishing scams that may try to take advantage of the Heartbleed Bug’s notoriety.

How about us?  None of the information that MarketCounsel internally stores regarding clients were affected.

Brian Hamburger Reveals What’s Behind Finra’s Latest Move with @FredPGabriel @newsfromIN

Monday, April 14th, 2014

Last week, MarketCounsel’s President and CEO, Brian Hamburger met with InvestmentNews’ Editor, Fred Gabriel to discuss the possible strategies behind Finra’s latest move. Finra’s CEO, Richard Ketchum stated that the regulator is no longer interested in overseeing investment advisers. Brian believes that this statement is true… for now. According to Brian, Finra is “reallocating resources until they face a more friendly political climate,” and “when the climate turns and people start to scrutinize the SEC’s over site, Finra will be ready, willing and prepared to step onto the stage.”

Click here to tune in, and here to read more.

Pressure on High-Frequency Trading, SEC Provides Guidance on Social Media, The SEC’s Focus on Cybersecurity, and Fiduciary Harmonization is Stuck

Wednesday, April 9th, 2014

All covered in this month’s MarketCounsel Adviser Squawk Box.  Click here to grab a seat in the office and listen to Brian Hamburger and Dan Bernstein discuss these latest developments affecting investment advisers.