Massachusetts Issues RIA Survey

The Massachusetts Securities Division released an Investment Adviser Survey on Friday, February 24, 2012 to obtain additional information from newer advisors and those not managing client assets. 


In discussions with the Securities Division, the intent of the survey is to be proactive in making sure the Securities Division not only has an understanding of all registrants in the state, but also to aid newer filers in understanding their regulatory responsibilities.


The 4-page questionnaire inquires about the RIA's registered and non-registered persons, the services offered by the firm and how the RIA is compensated for its services.


Advisors should complete the form and provide any supplemental information in a cover letter. For instance, if your firm was a new registrant in 2011, you may not have updated your assets under management. Although you do have assets and clients, the state would still like you to complete the form and indicate this in the cover letter.


A copy of the letter is below. Please contact us at support@advisorassist.com if you have any questions on compliance and regulatory responsibilities for your firm. Advisors participating in the AdvisorAssist Compliance Advantage Program will receive specific instruction from the AdvisorAssist Team.

From: Massachusetts Securities Division [mailto:MSD@sec.state.ma.us]
Sent: Friday, February 24, 2012 2:10 PM
Subject: 2012 IA Survey - response required

Dear Registrant:

The Massachusetts Securities Division (the “Division”) is currently conducting a survey of certain registered investment adviser firms located in Massachusetts that, according to its most recently Form ADV filings, discloses zero regulatory assets under management. This survey will be used to gauge the types of business being conducted and inquires as to the firm’s business practices within the last two years.

Please complete the attached survey and return this survey to:

Massachusetts Securities Division

Attn: 2012 Investment Adviser Survey

One Ashburton Place, 17th Floor

Boston, Massachusetts 02108-1552

or via e-mail to:

MSD@sec.state.ma.us

A response by your firm is required. This survey must be completed and returned by Wednesday, March 7, 2011.

Thank you in advance for your cooperation. If you have any questions, please contact the Division.

Sincerely,

Massachusetts Securities Division

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Advisory Boards Bring the "Wisdom of Crowds" into Your Practice

Could a diverse group of 5,000 people that know nothing about the advisory industry make better business decisions than a single 30- year industry veteran?  Setting aside the coordination needed to collect and interpret 5,000 opinions, the short answer is "yes."

Now back to the world of actionable advice!

You can improve the quality of your decisions by putting together an advisory board for your RIA firm. In his book Wisdom of Crowds, James Surowiecki shows how a collection of diverse individuals can make better decisions than any one individual (even when the "crowd" is made of of non-experts).  Here's a video clip that explains his ideas.



Your advisory firm can improve decision by forming (and using) an advisory board. Here are some thoughts on how to do each.

Forming your Advisory Board

• Confirm your motivations behind forming you advisory board.  For start-ups or newer RIAs, you may seek advisory board members that: add credibility to your new firm or investment process or serve as subject matter experts in a particular part of your service offering.  For established RIAs, you may be more interested in gaining insights from people that have experience in building and managing advisory practices.
• In most cases, advisory boards that are between three and five people work best.
• Be sure to select advisory board members that will add diversity to your decision making.  Don't pick clones!  No additional "wisdom" will come from a group of people that see the world or approach problems in the same way.
• When approaching each candidate, be clear about what role you would like them to play and the circumstances where you would likely utilize them.

Using your Advisory Board

• Frequency of your interactions with each advisory board member will likely vary depending on their role and the issues that come up for your firm.
• Communications with your board may take the form of a simple phone call to discuss a particular matter.  Alternatively, as larger issues issues or key decisions come up, schedule a conference call with your full board to solicit their thoughts.
• When soliciting their opinions, be sure to limit your role to laying out the issue.  Leave ample time for them to react/respond.
• Consider establishing a regular communication program that is targeted towards your advisory board, for example a quarterly business update.  This way you can ensure that each advisory board member feels "connected" with your firm.  And when you reach out to them for counsel, they will have a clearer sense of context.
• There are two schools of thought on compensating advisory board members.  For RIAs, the use of cash or equity compensation for advisory board members is certainly feasible, but it opens up a number of compliance issues that may not be worth the trouble for you or your board members.  Personally, I find that effective boards can be made up of successful industry professionals that are motivated by the non-economic aspects of helping an entrepreneur build a business.

I am a firm believer that decisions making is improved when multiple viewpoints are incorporated.  When done right, your RIA's advisory board can become an incredibly valuable resource to your firm.

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What's your RIA's Sustainable Competitive Advantage?

Brian R. Lauzon, CFA shares his views on the importance of knowing and communicating your firm's sustainable competitive advantage.

See his guest post on the ByAllAccounts blog entitled "What's Your Edge? Identifying your RIA's Sustainable Competitive Advantage."

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The Big Switch: Key Dates for RIAs Moving from SEC to State

With all the details finalized, the "Big Switch" is in full swing.  For the estimated 3,200 RIAs that will be impacted by these new rules, here are some important dates to keep in mind.

January 1, 2012:  If you are currently registered or pending with the SEC, you must amend your ADV no later than March 30, 2012.  New advisors filing in 2012 must have $100 million or more within 120 days

January 3, 2012:  Existing mid-size advisors can begin their SEC to state transition.

January 1, 2012 to March 30, 2012:  Existing mid-size SEC advisors may select any date in this range for calculation of their "regulatory assets".

March 30, 2012:  Deadline for ADV amendment for all advisors (SEC, State or transitioning)

June 28, 2012:  Deadline for withdrawal from SEC registration.

Needless to say, this transition can be complicated and will impact a significant number of RIAs.  If you have any questions, feel free to drop us a note at support@advisorassist.com.

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A Recap of the TDAI National Conference

I just returned from the TD Ameritrade Institutional 2012 National Conference in Orlando, FL.  They named the three-day conference "Shaping the Future Together."  Here are some brief highlights for those that weren't able to attend this event.

Pre-Conference

TD put together a full agenda for the pre-conference day on Wednesday.  Attendance was actually pretty high considering it was a "pre-day."  The sessions were heavily weighted towards demonstrating how technology can help RIAs manage their practices more efficiently.  This was also TD's opportunity to demonstrate their Veo platform, with a number of sessions devoted to educating users.  They did a good job at folding in a number of topics presented by industry consultants like Chris Maury from Laser App Software, Spenser Segal from ActFi, and Ryan Fauls from eMoney Advisors.  (See conference link for all presenters.)

Keynote Speakers

No question, the keynotes were all really fantastic.  On the technology-focused pre-conference day, Joel Bruckenstein (Technology Tools for Today) discussed his views on the latest trends in advisor technology.  

We then got a heavy dose of foreign policy through the eyes of Robert Gates (former US Secretary of Defense) and Dick Cheney.  Their messages were frank and often sobering.  

Sheila Bair (former FDIC Chairman) did an excellent job of putting recent advisor regulation in perspective.  Personally, I appreciated the point she made about Dodd-Frank, calling in "imperfect" but overall we are better off for it.

Economic and market views were delivered by TD Bank Chief Economist Craig Alexander and Wharton Professor Dr. Jeremy Siegel.  Both sessions were very heavily attended and the advisor audience seemed very willing to engage with both.

Tom Bradley gave a great talk on the state of the RIA industry and where TD sees themselves as a catalyst for advisors "going independent."  He also devoted a significant amount of time talking about TD's options trading capabilities and acquisition of Thinkorswim.  (I would say that about 10% of the advisors attending were active users of options in their investment strategies.)

Fred Tomczyk's (President and CEO, TD Ameritrade) talk turned into a surprise interview by CNBC's Mandy Drury.  Great format for his broad message about how important the US wealth management industry will be for TD's future growth plans.

Primary Themes

1)  Social Media. Wow! There was a very large area designated as the "Social Media Lab" and it was jammed on Thursday and Friday.  Advisors were really curious about how to incorporate social media into their daily lives.  And the social media experts manning the lab were swamped with inquiries.  LinkedIn had a very strong presence, with two representatives from their "financial services" group that were very knowledgeable about our industry.  One advisor I met described social media this way: "I resisted up to now but I will test the waters in 2012."  TD also promoted Twitter updates from attendees so check out #TDAI2012 on Twitter to see comments from the conference.

2)  Compliance & Practice Management.  Like many RIA conferences, practice management was prevalent in the agenda and was at top-of-mind among the majority of advisors.  The usual topics like the importance of efficiency and client segmentation were covered very well.  Likewise, compliance and regulatory change was the topic of many breakout sessions.  It seemed like advisors were particularly interested in the subject of changes in ERISA regulations as well as the impending "SEC to State" switch for mid-sized advisors.

3) Retirement Opportunity.  The topic of retirement came up a number of times and there were three breakout sessions devoted to the advisor's opportunity to capture retirement assets, fiduciary roles, as well as upcoming changes in ERISA regulations.  I am looking forward to watching this continued trend and was happy to see that TD offered so much content on this.

One more thing that I thought was great.  TD set up a Red Cross booth so that attendees could fill bags of essential products for homeless veterans.  TD donated 2,000 bags and attendees were given the opportunity to fill bags as they walked to and from sessions.  Seeing the crowd around the Red Cross booth was so great and TD leadership did a great job of promoting this effort.

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