Dept of Labor Stepping Up to Fiduciary Responsibility for Retirement Advisers

Senior Adviser RegulationsProposed rule:  Labor Department proposes to hold retirement investment advisers to a fiduciary standard, leaving them to avoid conflicts of interest that include sales based on commission and sales performance compensation.

With the proposed rule back on the table and likely to pass, brokers and insurance agents will be pressed to update conflict of interest policies and procedures.  FINRA focus on senior and vulnerable investors has increased over the past years. In 2016 FINRA plans to make treatment of senior investors a priority and urges firms to monitor investor accounts for red flags like overly aggressive investments, unusual asset movements, and an unusual number of high cost products driving unsuitable recommendations.

April 2015 FINRA launched a Securities Helpline for Seniors (HELPS™) and toll-free number where senior investors can get assistance with brokerage accounts or raise concerns. Armed with information from over 2500 calls, FINRA released an end of year report on effective practices brokers  and investors can take to establish a healthy working relationship that provides for the best interests of the investor as well as a suitable role for the broker.

Read the Report  2016 – FINRA Report: Securities Helpline for Seniors

Census tells us that in the U.S., demographics are shifting toward retirement age as the Baby Boomer generation reaches 65. By 2030 an estimated 72 million people will be over 65 and living on retirement income. There is a significant challenge to protect investors in this age group; as they are highly vulnerable and once their savings is gone, typically have few resources to rebuild vital lost assets. The Securities Helpline for Seniors (HELPS)2015 year-end report is a valuable resource in understanding risk for investors and firms. Sanctions and fines are high for brokers dealing in unsuitable senior products and found engaging in fraudulent loan practices.  

The report outlines a wide spectrum of calls and has been useful in helping FINRA analyze patterns and trends for improved regulatory outreach.

FINRA Tips for firms working with Senior Investment Accounts:

  • Establish a Trusted Contact at Account Opening

The trusted contact would be someone the firm can contact if they suspect nefarious activity triggering concerns about the financial or personal well-being of their client. Prior authorization enables the firm to contact the trusted individual on the account owners behalf bypassing potential privacy related issues.

  • Protect Investors from Advisors who Occupy a Position of Trust to Take Advantages

While developing a position of trust is an important component to the investment relationship, it can become problematic if a registered representative abuses the relationship to take advantage of the client. Some firms prohibit registered representatives from serving as “power of attorney”, trustee, or a similar capacity to reduce risk.

  • Establish a Senior Issues Point of Contact

Establishing a specialized group within the firm to support senior investor issues can guide firms I developing practices and products to better serve senior client needs. Additionally these groups can provide a resource for navigating the varied regulatory requirements that differ by state.

  • Train Staff to Identify and Escalate Incipient Client Incapacity

Many firms have implemented annual training to help employees recognize when trouble is afoot with their senior client. Additionally, senior clients have unique needs and disabilities that may require attention. Training can help staff to recognize these needs and support their client satisfactorily.

  • Understanding Tax Consequences of Transferring Assets

Senior investor vehicles have age restrictions and Required Minimum Distributions (RMD). Training registered representatives to protect seniors from unintended tax consequences gives the firm an added opportunity to build trust and provide value for their client. Additionally, ensuring clients are doing what they can to prevent unfavorable tax treatment by involving the clients tax professional is an effective practice.

Additional suggestions are included in the 2015 report


RND Resources Inc works with broker-dealers and registered investment advisory firms to establish procedures and policies that meet regulatory obligations. Our mission is simple: We strive to bring securities firms integrated; business planning, compliance, operations, trading, and registration solutions so you can focus on growing the business without worry over complex and ever-changing regulatory issues.  We grow with your business and help you succeed.   

View our company brochure for more details about how we can help. For a quote on outsourced compliance services, FinOps, or responding to a FINRA compliant call us at (818) 657-0288.

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