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Next Level Coaching with Revenue Diagnostic
Earns Industry Award
A Bi-monthly Publication from Your Business Growth Expert
NOVEMBER 2016
ALSO INSIDE
It Isn’t Too Late to Take the Continuity Challenge
Important Advisory Changes to Comply with DOL
Assistant University and Principal Meeting Highlights
Save the Date for 2017 Conferences
Connect National Conference – San Diego, Calif.
Experience four days packed with content that will increase your efficiency and effectiveness, improve your profitability and secure your practice now and in the future. You’ll hear from incredible keynote speakers, subject matter experts from the home office and professionals from our strategic partner companies. This event also provides a great opportunity for networking with your peers from across the country.
June 25-28
Next Level #15 – Workshop #2 – Omaha, Neb.
Next Level is our premier coaching program where you are led through a step-by-step process to reinvigorate each area of your practice; helping you to increase profitability, grow assets and take control of your work-life balance. To be eligible for Next Level: Building the Million Dollar Coaching Program, advisors must have GDC greater than $175,000 or a minimum of $10 million in assets under management. More information about the Next Level program can be found on the Business Center.
Jan. 10-11
Masters Forum Pinnacle Club – Tucson, Ariz.
Masters Forum is an invitation-only event for our most successful advisors. Attendees will have access to dynamic educational opportunities with plenty of time to relax and enjoy the sights and sounds of the area, as well as the amenities at the resort. Qualification details are available on the Business Center.
March 12-15
Masters Forum Excellence Club – Tucson, Ariz.March 9-12
Assistant University – Omaha, Neb.
Assistant University is Securities America’s premiere training and networking event for sales assistants, support staff and office managers. It is a two-day intensive workshop providing opportunities to increase knowledge in the areas of technology, compliance, operations and practice management. The conference combines formalized classroom learning in both general and break-out sessions. Assistant University also offers focused small-group discussions, networking opportunities and hands-on use of Securities America’s technology to help assistants reach their full potential. For more information, contact Chris Kirby.
Oct. 5-6
Principal Meeting – Omaha, Neb.
The Principal Meeting welcomes OSJs and Acting Principals to network with professional peers, discuss challenges and solutions and focus on current and future trends to better maintain and lead a compliant business. For more information, contact Rebecca Bowman.
Oct. 5-6
NOVEMBER 2016 | The STAR 2
Contents NOVEMBER 2016
Feature Story
7 Next Level Coaching with Revenue Diagnostic Earns Industry Award
The hundreds of advisors who have reaped the benefits of Securities America’s Next Level Coaching with Revenue Diagnostic program already know it’s a winner. Now we have a new piece of hardware in the trophy case to back them up.
Columns
9 Practice Management It Isn’t Too Late to Take the Continuity Challenge
15 Technology Integration Solutions Let You Take Redtail Client Data to a New Level
17 DOL Fiduciary Rule Important Advisory Changes to Comply with DOL
21 Compliance Failure to Report Forgivable Loans Costs Independent RIAs
23 Assistant University and Principal Meeting Highlights Presentations, Discussions and Consultations Promote Empowerment at Conference in Omaha
27 FSI Update Oxford Economics Study: Independent Advisors are a Key Economic Driver for Their Communities
Need to Know
3 News and Announcements
4 Advisor News
5 Media Mentions
6 Welcome New Advisors
13 Technology Notes
Connect with Us
FACEBOOKfacebook.com/SecuritiesAmericaInc
TWITTERtwitter.com/SecuritiesAm
LINKEDINlinkedin.com/company/securities-america-inc
YOUTUBEyoutube.com/SecuritiesAmericaInc
StarThe
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Financial Services Institute
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3 The STAR | NOVEMBER 2016
Connect Special Edition Coming Soon
This year’s issue of our Connect Special Edition magazine will focus on how successful OSJs have built their businesses and will include plenty of tips and tools for others to follow in their path. Watch your mailbox and email later this month. After reading, we encourage you to share it with your staff and colleagues.
Holiday Hours
In observation of the upcoming holidays, Securities America’s home office will be closed Thanksgiving Day, Thursday, Nov. 24, and will close at 2 p.m. CST on Friday, Nov. 25. We will
be closed on Monday, Dec. 26 to observe the Christmas holiday and Monday, Jan. 2 to observe New Year’s Day.
Third Quarter 2016 Review and Commentary
View the latest quarterly review and commentary from Ladenburg Thalmann Asset Management. Read more information on Securities America’s Business Center website.
Securities America Unveils Updated Public Website
If you haven’t checked it out yet, be sure to visit SecuritiesAmerica.com. Our public website received a face-lift featuring slimmed down copy and improved navigation. The “voice” of the site now focuses on prospective advisors, with separate tabs for prospective employees (Careers), media (Newsroom) and your clients (Investors). You can still log in to Business Center, where we store content exclusively for you and your staff, from a link on the SecuritiesAmerica.com homepage. Have questions, ideas or suggestions for the site? Email our website and social marketing specialist, Clint Langham.
News and Announcements
NOVEMBER 2016 | The STAR 4
Scott and Janice Bordelon Sponsor Veterans’ Regatta with Local Yacht ClubScott and Janice Bordelon of BEAM Asset Management in Covington, La., were two of several sponsors for the Pontchartrain Yacht Club’s (PYC) Second Annual Veterans’ Regatta on Sept. 17. The race was open to all sailors and all types of boats and kayaks. According to PYC, over 20 veterans participated in the race with the club’s sailors and over 50 family members and friends came out in support of the regatta. The event welcomed three World War II veterans from the local area, two of them relatives of Scott and Janice. All proceeds collected from the regatta benefited participating local veterans’ organizations including Wounded War Heroes and We Heart Veterans.
Ron Eckloff Recognized by Buffalo County CASA for his Volunteer ServiceThe Kearney/Buffalo County CASA (Court-Appointed Special Advocates) honored Ron Eckloff of Barney Financial Services in Kearney, Neb., for his advocacy for abused and neglected children. Eckloff has been a CASA volunteer for over a year, during which he has been an advocate for two families. He takes the time to get to know his CASA children and identify their needs and wishes. Eckloff dedicates himself to each family throughout the case, is a constant advocate in their lives and works to identify resources to meet their needs. Eckloff has always looked for what is in the best interest of the children to ensure they are safe.
“We’re called to help others,” said Eckloff. “This is a way we can be directly involved in someone’s life, alongside those who need help. Being a CASA volunteer has really stretched me. I’m dealing with issues I have never had to think about before. At the same time, it has been really rewarding. I’ve had a chance to meet some wonderful, caring people, and I’ve been really impressed with what has been happening at CASA to make sure kids don’t get lost in the legal system.”
Share your professional or philanthropic news with us by emailing [email protected] News
5 The STAR | NOVEMBER 2016
Securities America Buys Another Independent Broker-Dealer
Financial Advisor IQ — Another independent broker-dealer has joined Securities America, citing its appeal in compliance and fiduciary offerings, the company said in a press release. Its latest acquisition, Wall Street Financial Group, brings Securities America 67 advisors with $2.1 billion in client assets.
The Wall Street Financial Group acquisition is Securities America’s ninth in eight years. Together, the deals have brought the independent broker-dealer more than 1,000 advisors with about $14.9 billion in client assets producing about $127.8 million in annual revenue.
Securities America Receives Industry Award for Next Level Coaching Program
Yahoo.com — Wealthmanagement.com recently presented Securities America with its Industry Award for Practice Management in the division of broker-dealers with more than 1,000 representatives.
The award is in recognition of the Next Level Coaching with Revenue Diagnostic program. Since being introduced in 2008, this nine-month coaching program has continued to grow and evolve. Participants in 10 Next Level classes gathered, on average, 128 percent more assets in the 24 months after the program than they had in the 24 months leading up to it.
The award was accepted Sept. 29 by Randy Reed, vice president of application development, at a ceremony in New York City.
Broker-Dealers Deploying Advanced Cybersecurity Measures
InvestmentNews — The nation’s large broker-dealers are helping to protect financial planners from the threat cyber criminals pose to their business, even as advisors themselves tend to underestimate the risk.
Firms are moving beyond the typical warnings of avoiding public Wi-Fi and changing passwords. Broker-dealers today are testing advisor reactions by sending them fake phishing scams, creating secure instant messaging systems and encouraging use of dual factor identification for clients’ email, among other steps.
Securities America is one of the firms that’s sending random emails to its advisors, mimicking phishing scams where the fraudulent communications appear to come from legitimate sources.
Media Mentions
NOVEMBER 2016 | The STAR 6
Advisor Name Previous Broker-DealerAadil Zaman Wall Street Financial Group
Adam Belusko Waddell & Reed
Adam Hartrum Assetmark Brokerage
Alan Ginsberg Wall Street Financial Group
Andrew Rich Wall Street Financial Group
Ann Rieder Wall Street Financial Group
Arthur Senowitz Wall Street Financial Group
Augustus Anninos Valic Financial Advisors
Barry Hatcher MetLife Securities
Brian Blaustein Wall Street Financial Group
Brian English Park Avenue Securities
Bruce Pultz Wall Street Financial Group
Cary Scheer Girard Securities
Christian Misa Wall Street Financial Group
Christine Sleboda Wall Street Financial Group
Dale Anderson Wall Street Financial Group
Dale Pensgen Wall Street Financial Group
Dale Pheasant Wall Street Financial Group
Daniel Bresnahan Wall Street Financial Group
Daniel Vansingel LPL Financial
Danny Senn Wall Street Financial Group
David Bennett Wall Street Financial Group
David Nagy Wall Street Financial Group
David Skultety LPL Financial
David Thompson Wall Street Financial Group
Dean Licata Wall Street Financial Group
Donald Burger Wall Street Financial Group
Eli Adams none
Frank Weisz Wall Street Financial Group
Geordie Robertson Wall Street Financial Group
Gladys Valentine Wall Street Financial Group
Gregory Harrison Wall Street Financial Group
Guy Guarrera Wall Street Financial Group
James McCarthy Wall Street Financial Group
Jay Epstein Wall Street Financial Group
Jay Salmon Wall Street Financial Group
Jeffrey Cheng Wall Street Financial Group
Jeffrey Minucci Fidelity Brokerage Services
Jeffrey Reid Scottrade
Jeremy Armagost VSR Financial Services
Joel Maness Wall Street Financial Group
John Berlucchi Wall Street Financial Group
John Cameron Wall Street Financial Group
John Freislich Wall Street Financial Group
John Poore II Sorrento Pacific Financial
Jon Tubbs Wall Street Financial Group
Advisor Name Previous Broker-Dealer Jonathan Bryant Wall Street Financial Group
Joseph Altobelli Wall Street Financial Group
Joseph Blando Wall Street Financial Group
Joseph Singleton Cetera Advisor Networks
Kenneth Graci Wall Street Financial Group
Kevin McCarthy Wall Street Financial Group
Kristina English Triad Advisors
Lester Hamrick Park Avenue Securities
Lisa Capizzi Wall Street Financial Group
Marion Syversen Wall Street Financial Group
Mark Fairclough Wall Street Financial Group
Mark Hein Wall Street Financial Group
Mark Kluge Wall Street Financial Group
Mark Stein Wall Street Financial Group
Martha Filadora Wall Street Financial Group
Marvin Gross Wall Street Financial Group
Michael Brown Wall Street Financial Group
Michele Freislich Wall Street Financial Group
Raymond Jenkins Edward Jones
Reginal Hynes Wall Street Financial Group
Richard Harter Wall Street Financial Group
Richard Read Woodbury Financial Services
Richard Yuran Wall Street Financial Group
Robert Berrin Wall Street Financial Group
Robert Dicks Wall Street Financial Group
Robert Mastrosimone Wall Street Financial Group
Robert Wilczak Wall Street Financial Group
Rodrick Dow Cetera Financial Specialists
Roger Augustyn VSR Financial Services
Ronald Merrill Wall Street Financial Group
Scott Battle Wall Street Financial Group
Spencer Corzine Wall Street Financial Group
Stephen Sloan LPL Financial
Steven Brodine VSR Financial Services
Steven Carlisle Taylor Capital Management
Steven Ellsworth Waddell & Reed
Syed Nishat Wall Street Financial Group
Terry Kerr Cetera Advisor Networks
Thomas Mclean Wall Street Financial Group
Thomas Mills Wall Street Financial Group
Thomas Shortslef Wall Street Financial Group
Timothy D’Angelo Wall Street Financial Group
William Bereza Wall Street Financial Group
William Dixon Wall Street Financial Group
William O’Donnell Wall Street Financial Group
William Plunket Woodbury Financial Services
Welcome New Advisors
7 The STAR | NOVEMBER 2016
The hundreds of advisors who have reaped the benefits of Securities America’s Next Level Coaching with Revenue Diagnostic program already know it’s a winner. Now we have a new piece of hardware in the trophy case to back them up.
WealthManagement.com recently awarded Securities America its Industry Award for Practice Management for the nine-month coaching program and Revenue Diagnostic feature that was added in 2015.
The Revenue Diagnostic produces reports showing revenue by household, predictions for practice performance and assets by age. It also includes two hours of consultation with a practice management expert. Benefits to advisors include protecting and increasing future revenue by understanding their current revenue streams and opportunities, discussing those opportunities with a seasoned industry business coach and creating an action plan.
ALL-NEW CURRICULUM
Next Level Coaching with Revenue Diagnostic Earns Industry Award
Feature Story
NOVEMBER 2016 | The STAR 8
Securities America already has plans to update the Next Level program to help advisors adapt as new regulations such as the Department of Labor’s fiduciary rule continue to reshape the financial services industry.
“We’re not going to stop here,” said Kirk Hulett, executive vice president of strategy and practice management. “We’re going to keep innovating with new practice management tools and coaching solutions to help advisors be the best owners and leaders of a practice they can be. This allows them to provide great quality advice to their clients for life.”
Now in its second year, the WealthManagement.com Industry Awards program recognizes the companies and organizations that support financial advisor success to inspire innovation and leadership in the financial services industry.
The 2016 awards were presented Sept. 29 at a ceremony in New York City.
We’re going to keep innovating with new practice management tools and coaching solutions to help advisors
be the best owners and leaders of a practice they can be.
- Kirk Hulett, Securities America executive vice president of strategy and
practice management
Randy Reed, vice president of enterprise architecture and application development at
Securities America, accepted the Industry Award in New York City on behalf of the company.
Participants in 10 Next Level classes gathered, on average, 128 percent more assets in the 24 months after the program than they had in the 24 months leading up to it. Advisors who completed the program increased their assets under management by an average of 81 percent over a randomly selected control group. In addition, 79 advisors out of 406 total participants have earned the program achievement bonus by placing $10 million in new assets in our fee-based programs.
9 The STAR | NOVEMBER 2016
October marked Securities America’s fifth annual Continuity Planning Month, when we encourage all advisors to complete a continuity plan or update their
existing plan by the end of the year.
Just because the calendar has flipped to November, it doesn’t mean you’re too late to get started.
on file, Securities America can’t call upon another advisor to lend a hand, which means your clients may be left in limbo. In the worst-case scenario, they will move their business to another firm, diminishing the value of your practice.
Continuity Planning Best Practices
The most effective continuity plans take into consideration all aspects of the business and clearly outline who needs to do what, how and when. When enacted, a successful continuity plan eliminates confusion and ensures a continuation of service. It also maintains security of sensitive information and generates value for key stakeholders such as your spouse, family members and business partners.
A thorough continuity plan includes:
• Who you’ve chosen to be your continuity partner
It Isn’t Too Late to Take the Continuity
Challenge
The First Step: Put Your Emotions Aside
Getting past the emotional implications of planning for unpleasant events can be a challenging hurdle. But understanding what is at risk for your family, clients and staff should provide ample incentive to file a plan with Securities America.
When developing a plan, it’s important to avoid “paralysis by analysis.” Yes, it forces you to face your own mortality and some unpleasant possibilities. But because events that trigger a continuity plan can strike anyone suddenly and without warning, it’s important for many of the most important people in your life that you have a clear plan in place as soon as possible.
Without you running the firm, there might not be anyone who can conduct necessary business. An unlicensed assistant isn’t authorized to handle all your clients’ needs. And without an agreement
Practice Management
NOVEMBER 2016 | The STAR 10
• What that partner will immediately do to service clients and operate the business
• Whether this partner will buy the business or agrees to prepare it for sale to a third party
• How your business is to be valued
• How and to whom purchase payments will be made
The agreement needs to be in writing, signed by all parties involved and filed with key players in your business and estate planning. It also needs to be communicated to your spouse, staff and the appointed executor of your estate.
Let Your Clients Know You’re Prepared
Don’t overlook the marketing benefits a continuity plan can provide. When you file your plan with Securities America, we can provide you the “Continuity Plan Verified” seal for use in your marketing materials to inform clients and prospective clients you’ve taken the time to secure your practice. On a deeper level, knowing you have a plan assures clients their interests are protected and their financial affairs will be taken care of, even if something happens to you.
The Differences Between Continuity, Succession and Contingency
Developing a continuity plan is an important first step in creating a succession plan. Both plans lay out what you want to happen to your practice when you are no longer running it. The difference is, a continuity plan is implemented immediately due to an unexpected disruption in your ability to work. A succession plan assumes you will not return
to run the practice; a continuity plan addresses the possibility that you will.
The term “continuity plan” is sometimes misused to refer to a contingency or disaster recovery plan. A contingency plan addresses how you will continue to operate following a disaster (e.g., fire, earthquake, tornado or flood). After those types of events, you’ll likely still be available to make decisions, lead the staff and communicate with clients. A continuity plan helps the staff, family and clients when you’re unable to manage the business due to illness, injury or death.
Take the Continuity Challenge Today
Because we recognize the vital role continuity planning plays in risk management, Securities America provides numerous resources to walk you through the process. The Practice Management Department offers sample plans, templates and other documents to help you create an effective continuity plan — no matter how simple or complex. Our consultants can even match you with other like-minded advisors as potential continuity partners.
Additional Resources
To get started today, check out these free resources:
• Continuity Readiness Assessment Tool
• Continuity Plan Organizer
• Sample Continuity Agreement Template
• Help For Creating a Continuity Plan page on the Business Center
• Continuity Planning: The Best and Worst Case Scenarios
PLAN PARTNER PROTECTStart by understanding the value
of your practice and determine the most beneficial arrangement.
Next, define and find the right partner or opportunity and formalize the agreements.
Finally, implement and know you have created a living plan for protecting
your clients, staff and family!
11 The STAR | NOVEMBER 2016
PEER FORUMS
Learn best practices from offices across the country in our Peer Forums – or share your own insights. Find these forums in the Business Center.
Advisor Forum
Assistant Forum
Branch Manager Forum
Financial Institutions Forum
DOL FIDUCIARY RULE RESOURCES
Found under the Staying Compliant tab in Business Center, the DOL Fiduciary Rule page features Securities America’s DOL Digest, client resources, U.S. Department of Labor resources and articles. View recent issues of the DOL Digest on the following topics:
• ERISA Retirement Plans – Just about everyone associated with servicing and operating an ERISA retirement plan will be a fiduciary.
• Managing Emotions – The DOL fiduciary rule has accelerated the need for advisors to shift away from investment management as the sole driver of their value and incorporate holistic advice and value-added service offerings.
• Document, Document, Document – The DOL fiduciary rule will increase the need to document client interactions to demonstrate why recommendations are in the client’s best interest.
TRAINING LIBRARY
If you haven’t already, be sure to check out the Training Library located in the Resource Center. It houses of all Securities America training-related materials for you and your staff. Located in the top right corner of the Resource Center and through the Training Tab on Business Center, it offers the following features:
• Training materials searchable by keywords• Applications, materials and client-approved items that can be filtered• Topics of focus to allow for better need-based searches• Links to training materials and their corresponding Business Center application page• Similar functionality to the Forms page
New materials are continually being added to the Training Library, so check back often for new opportunities to expand your skills.
NextGen Advisor Forum
NextLevel Graduates Forum
Technology Forum
Women Advisors Forum
Technology Training Resources
NOVEMBER 2016 | The STAR 12
2 MINUTE TECH TIP VIDEOS
Gift Blotter
Gifts, reimbursed expenses and other forms of compensation must be properly disclosed. Learn how the Advantage Compliance tab helps you complete your required gift blotter.
Form ADV Submission
Securities America advisors must deliver form ADV Part 2B prior to or as you begin working with clients. Learn how to create and submit your brochure supplement for approval.
AdTrax Submissions
Proper submission of advertising and communications is necessary for review and books and records purposes. See how your office can use the Adtrax system to quickly and easily submit and follow the status of these items.
Rep Code Groups
Are you an OSJ, assistant or advisor with access to multiple rep or split codes? Learn how to set up and use custom built rep code groups to help you more easily manage and review business under the rep codes that matter most to you.
13 The STAR | NOVEMBER 2016
John Vipond is a product analyst with the Field Technology Group at Securities America. You can reach him at 800-747-6111, ext. 3336, or [email protected].
Securities America Technology News
Assistant UniversityThe technology team would like to thank everyone who joined us in Omaha for Assistant University, especially those who visited our new Technology Solutions Center, sat in on a round-table discussion, attended technology training sessions and offered feedback on ways to continue improving our technology. We sincerely appreciate the opportunity to demonstrate and discuss our technology with each and every one of you. We hope to see you all in Omaha again next year!
Redtail Integration with New Business SolutionsSecurities America rolled out additional integration capabilities between the popular Redtail CRM solution and New Business Solutions. Offices that choose to establish Seamless Login to Redtail through Advantage now have the capability to establish new client records. You can also retrieve contact data from existing records to pre-fill paperwork. To find out more about this new integration, see page 15.
Account Servicing Updates• Enhancements — A number
of changes were made to the core functionality of the Account Servicing Tool, including a new soft search option, new opening
menus and a new Status display that includes a filter function, sortable columns and a revised date display.
• Research Requests — The Research Request submission workflows for new and existing sponsor and brokerage accounts was added in the Account Servicing Tool. The option to submit Research Requests from the Online Answer Center was retired. The status of Research Requests is available in the Account Servicing Status display.
• Trade Correction Requests — The ability to request a Trade Correction for brokerage accounts was added in the Account Servicing Tool. The option to submit Trade Correction Requests from the Online Answer Center was retired. The status of Trade Correction Requests is available in the Account Servicing Status display.
• Compensation Research Requests — As part of the ongoing retirement of the Online Answer Center, the Compensation Research Request option was migrated to the Reports Tab. The options to submit Compensation Research Requests and run reports on previously submitted requests were added to the Compensation and Advisory
by John Vipond
Technology Notes
NOVEMBER 2016 | The STAR 14
widgets within the Reports Tab. You may also submit a new Compensation Research Request from the Action Menu in Account Manager.
• Online Answer Center Menu Change — Because all functionalities (Research, Trade Corrections and Compensation Requests) have been moved to new locations, the ability to submit requests through the Online Answer Center has been retired. The ability to search previous requests submitted through the Online Answer Center was left intact to allow any outstanding items to be viewed. The Online Answer Center display will remain available until the first week of December, at which time the tab will be removed from Advantage.
National Financial Updates• Streetscape — National Financial updated
Securities America to the latest version of Streetscape. The updated version of the application has a slight change to the look and feel, however, the general location of all items is the same.
Pershing Updates• Pershing NetX360® Mobile — A new
feature in NetX360 Mobile uses fingerprint touch ID login on iPhone and iPad devices. The feature is available upon your next login to NetX360 Mobile.
If you have questions regarding any of these technology notes, contact the Field Tech group using your Business Center Webmail for further clarification or send a message
to the Suggestion Box with your technology enhancement ideas.
15 The STAR | NOVEMBER 2016
by Aaron Spahr
Aaron Spahr is a lead product consultant at Securities America. You can reach him at 800-747-6111, ext. 3331, or [email protected].
Integration Solutions
Let You Take Redtail Client Data to a New Level
If you’re one of the hundreds of Securities America offices using the popular Redtail customer relationship management (CRM) program, you can take advantage of three new integration features through New Business Solutions at no additional cost.
In addition to organizing client information, tracking office workflows and delivering exceptional customer service, you can now use Redtail to establish accounts for new clients in New Business Solutions. Client data can also be pushed to Redtail from New Business Solutions to create new CRM records. Keep reading for tips on how to use these new time-saving features.
Getting Started
To enable the Redtail features in New Business Solutions, you must first set up Redtail Single Sign-On in the Admin section under the Preferences tab in Advantage. Select Enable Single Sign-On, then hit Save and Update Preferences. This will activate the Redtail tab for you to establish
access through Advantage and enables Redtail features to display in New Business Solutions. Please close all browser windows and log back into Advantage to see the changes.
The next time you access New Business Solutions, log into the new Redtail area and hit “Save.” Because a nightly process is needed to pull your initial client list, you’ll need to wait until the next business day to use the new features.
New Features
• Retrieve Data from Redtail
When using Add Account in New Business Solutions, as you type a client’s last name, you will see Redtail clients listed with records from New Business Solutions and Account Manager. The Redtail records are indicated with the Redtail logo. Select a Redtail prospect record to pull basic information into the Add Account screen. If the client has an account with Securities America, select the New Business Solutions record to populate more information.
Technology
NOVEMBER 2016 | The STAR 16
• Establish a New Client Record
If you’re opening an account for a client who isn’t in Redtail, use the information you entered in the online account setup process in New Business Solutions to create a basic Redtail record by clicking the Send to Redtail button. This creates a new record in Redtail and allows you to receive update notes as the account goes through the approval process.
• Send Multiple Records to Redtail The new Redtail section in New Business Solutions displays a client list that can be selected and sent to Redtail in bulk to create new records. If you’re just getting started with Redtail, this option can quickly and easily create new client records. If you already have clients in Redtail, be sure to review your selections closely to avoid creating duplicates.
More Redtail Information
Access our Getting Started and Frequently Asked Questions guide to learn more about the integration features available for you to begin using today.
17 The STAR | NOVEMBER 2016
Mutual fund share classes and their respective costs have come under greater regulatory scrutiny in recent years. The proliferation of funds and share classes has created a universe of more than 24,000 different investments, according to an April 2016 article in InvestmentNews. While many fund companies offer fairly standard A, B, C and I shares; others have created up to 18 share class variations to attract different investor niches. Understanding the nuances of each fund and its share classes has become challenging for advisors, let alone individual investors.
Although the Securities and Exchange Commission (SEC) and the Department of Labor (DOL) may have their differences of opinion on the finer details of a fiduciary standard, they agree on two aspects: advisors must act in the best interest of their client (retirement clients specifically for the DOL) and acting in the client’s best interest requires transparency and consideration of fund expenses and fees that compensate the advisor and their affiliated firms.
Since the DOL finalized the fiduciary rule in April, Securities America, along with the Ladenburg Thalmann family of companies, has been analyzing the impact of the rule and how to address these changes to assist advisors in complying with the rule while also supporting the economics of the advisory model. Several conclusions have been reached, although specifics on implementation and timelines have not been finalized.
Important Advisory Changes to Comply with the Department of Labor
Janine Wertheim
President, Securities America Advisors, Inc.
800-747-6111, ext. 1005 [email protected]
DOL Fiduciary Rule
NOVEMBER 2016 | The STAR 18
Mutual Fund Lowest-Cost Share Class in Advisory Programs
Securities America’s product offering for all advisory accounts, both qualified and non-qualified, will include only the lowest-cost share class available. We have begun negotiations with fund companies to determine which of their share classes will be made available to us in our advisory programs. Some may offer their I-shares (Institutional share class) and waive their minimums across the board, and others may offer their advisory share classes.
In some cases, if they do not have an I-share or advisory share class, the lowest-cost share class may include mutual funds that pay 12b-1 trails, with the trail commission being rebated back to the client in both qualified and non-qualified advisory accounts. We will require the company to modify its prospectus language to lock down which share classes are available in advisory programs and/or modify their selling agreements with us to be crystal clear on which share classes are available in our advisory programs. Advisors will be required to use the approved lowest-cost share class when constructing and managing client portfolios for both qualified and non-qualified advisory accounts. Our clearing firms, National Financial and Pershing, will assist us with processing non-taxable conversions to move existing share classes into the lowest-cost share classes available. We anticipate we will be able to do the majority of the work on behalf of the advisor. We will provide a schedule of conversions by fund company that will start in the first quarter of 2017.
In the event that a mutual fund company cannot honor a tax-free conversion, these assets may be grandfathered, and you and your client will need to determine the best solution for minimizing the tax impact. All new purchases, however, will be required to use the lowest-cost share class.
The approved advisory Mutual Fund list, the Ladenburg Investment Research list and model portfolios will be updated to reflect these changes. We anticipate having the new approved Mutual Fund list with the lowest-cost share classes in the first quarter of 2017.
All 12b-1 Trails Rebated to Clients in All Advisory Programs
Currently, 12b-1 trails are rebated to clients in most qualified advisory accounts (some of the Managed Opportunities accounts retain 12b-1 trails to offset costs). In the future, all 12b-1 trails in all advisory programs (FAP, LifeGuide, ABBS, Managed Opportunities), both qualified and non-qualified, will be rebated to clients. As discussed above, the lowest-cost share class in some instances will end up being the load-waived A-share with the trail rebated to the client if the fund company does not offer an I-share or advisory share class.
• Effective Dec. 1, 2016, all new advisory accounts will be coded to rebate all 12b-1 trails to the client.
• Effective Jan. 1, 2017, all trails in all existing advisory accounts will be coded to rebate 12b-1 trails to the client.
continued on pg. 19
19 The STAR | NOVEMBER 2016
Disclosure of Advisory Fees
Currently, many of the advisory programs across the industry display to the client one fee that includes the advisor’s compensation and the cost of the advisory platform. Typically, the broker-dealer/RIA negotiates directly with the advisor to determine the platform fees for advisory programs based on total assets under management, the average size of the advisor’s accounts, the overall business size and sometimes the trading strategy. Advisory fees will now need to be decoupled to display the broker-dealer/RIA’s platform fee and the advisor’s advisory fee. This will most likely be disclosed in the fee schedule when the account is established and may also be disclosed on the client’s brokerage statement where the fee notification is displayed. Clients will need to be notified any time their fee schedule changes, including when the advisor’s portion of the advisory fee changes.
No Transaction Fee (NTF) Funds Face Challenges in Existing Advisory Programs
Advisory programs will need to address the conflict of interest associated with eliminating transaction costs (ticket charges) on some funds and not all funds. The need to move to lowest-cost share class will eliminate many of the NTF funds available in our advisory programs today, including the recently introduced Strategic Partner NTF funds that have no ticket charges on fund purchases of $2,000 or more. The Strategic Partner NTF program for commission-based programs will continue and will be disclosed in the Best Interest Contract.
There may be an opportunity to develop programs with a limited number of fund companies that will make their lowest-cost share class available with no transaction costs or ticket charges. We need further DOL guidance on these types of programs and are exploring all of our options to ensure you are equipped with competitive programs designed to meet the needs of your clients.
If you have specific questions related to our advisory programs, please contact your advisory services consultant at 800-747-6111, option 5. Visit the Advisory Business page on the Business Center for
information on consultants and specialists in your area. See the regional map. If you have questions related to the DOL fiduciary rule, please email [email protected].
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Advisor Pricing and Program Pricing
In short, both the SEC and the new DOL rule are forcing broker-dealers and advisors to eliminate 12b-1 trails and revenue sharing associated with advisory platforms. Eliminating these revenue sources will remove revenue that helped broker-dealers and advisors subsidize the cost of providing advisory programs to clients. At the same time, those very revenue sources are being transferred back to the client either through 12b-1 rebates or by moving client assets to the lowest-cost share class. This means advisors and broker-dealers/RIAs will need to re-engineer their programs and pricing to reflect these changes. In some instances, advisors will need to decide whether or not to adjust their pricing to their clients to reflect the changes where the broker-dealer and the advisor no longer receive subsidized revenue from the fund companies to offset costs. This may result in net savings to your clients depending on the funds in their portfolios.
Extensive Communication and Training
Securities America is committed to addressing the evolutionary changes from the DOL fiduciary rule impacting our industry with sustainable processes and pricing for advisors. We understand explaining this fundamental change to clients may be challenging. We will provide resources in the coming months to assist you in evaluating your current pricing structure and service matrix to determine where adjustments may be needed. We will provide sample communications and guidance for having those conversations with clients, so you have ample time to prepare for the upcoming changes. In short, we will partner with you as the industry navigates this fundamental change.
We will share a complete timeline along with specific changes to advisory programs and the new approved Mutual Fund product list for advisory accounts in the next few months. Our over-arching goal is to minimize any disruption to you and your clients while making sure we comply with the evolving regulatory landscape. As a reminder, the new DOL rule begins to take effect April 10, 2017, with additional requirements phased in by the final implementation date of Jan. 1, 2018.
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Failure to Report Forgivable Loans Costs Independent RIAs
by James Clements
James Clements is director of Investment Advisor Compliance and Licensing/Registration at Securities America. You can reach him at 800-747-6111, ext. 6122, or [email protected].
Recently, the Securities and Exchange Commission (SEC) censured and fined two registered investment advisors for failing to disclose to their clients forgivable loans received from their broker-dealers. An SEC investigation found Washington Wealth Management (WWM), a San Diego, Calif.-based registered investment advisor, failed to disclose its receipt of more than $1.8 million in loans from WWM’s newly engaged broker-dealer.
WWM entered into an agreement for the broker-dealer to provide trade execution, clearing, custody and other services for its clients. In connection with this agreement, WWM received a loan of more than $1 million and another of more than $66,000, each potentially forgivable over a five-year term. The broker-dealer made two additional loans to WWM of more than $485,000 and $277,000. The SEC’s investigation found WWM failed to disclose its receipt of the loans to its clients and in its Form ADV.
Another SEC investigation found Advantage Investment Management (AIM), a Cedar Rapids, Iowa-based registered investment advisor, failed to disclose it had received more than $3 million in a forgivable loan
made by a broker-dealer and failed to disclose conflicts of interest arising from the loan.
AIM entered into an agreement with a third-party broker-dealer under which the broker-dealer would become AIM’s new primary broker-dealer and would provide trade execution, custody, and reporting services for AIM’s clients as well as sponsor several advisory programs. In connection with the agreement, the broker-dealer issued a loan in excess of $3 million, forgivable over a five-year period.
The SEC’s investigation found AIM breached its fiduciary duties by failing to disclose its receipt of revenue from the broker-dealer and the conflicts of interest created by the agreement to its clients in its Form ADV.
The SEC’s order finds WWM and AIM violated Sections 206(2) and 207 of the Investment Advisers Act of 1940. Without admitting or denying the SEC’s findings, WWM and AIM consented to the entry of the SEC’s order censuring them, requiring them to cease and desist from further violations and pay a $50,000 and $60,000 penalty respectively.
Compliance
NOVEMBER 2016 | The STAR 22NOVEMBER 2016 | The STAR 22
What Should You Do?
If you have an independent RIA and you have a loan with Securities America, be sure to disclose it. It should be under Item 14 in your Form ADV 2A. Below is sample language that can help you meet this requirement.
Sample LanguageIn connection with (firm name) engaging the services of Securities America as its primary broker-dealer, Securities America provided (firm name) with an arrangement over and above the compensation received for selling products and services through Securities America. These arrangements may include bonuses, enhanced payouts, forgivable loans, business transition loans and other forms of cash/non-cash compensation for meeting certain production levels (the “Note”).
In addition to the Note, an IAR may have received payments from Securities America in connection with the transition from another broker-dealer or investment advisor firm. These payments, which may be significant, are intended to assist the IAR with costs associated with the transition mentioned above. Similar
to the Note, these payments may be in the form of loans to the IAR, which are repayable to Securities America or are forgiven by Securities America based on years of service with Securities America.
The Note and any additional payments to new or existing IARs present a conflict of interest in that an IAR has a financial incentive to maintain a relationship with Securities America that may include directing clients to Securities America for execution of trades. However, to the extent an IAR directs clients to Securities America for services, it is because the IAR believes it is in that client’s best interest to do so. (Your firm) has systems in place to review IAR managed accounts for suitability and best execution practices over the course of the advisory relationship.
This is an important item you should disclose to help you build a better compliance program for your firm. You should also seek guidance from your outside consultants on areas of concern. As always, check the e*Star for alerts regarding compliance topics. You can also contact Securities America’s RIA Compliance Department for assistance.
23 The STAR | NOVEMBER 2016
Assistants from North Dakota to Texas, New York to California and a variety of states in between attended this year’s Assistant University, held Oct. 6-7 at the Hilton Omaha. The diverse group of attendees ranged from assistants in their first weeks on the job to licensed directors of client services who have worked in the financial services industry for two to three decades.
The conference kicked off with a warm welcome from Securities America CEO and President Jim Nagengast. Next, Kirk Hulett, executive vice president of strategy and practice management, and Mark Lasswell, senior vice president and chief compliance officer, discussed additional requirements advisory firms will need to meet under the new Department of Labor fiduciary rule.
Adhering to the event’s empowerment theme and focus on practical service hacks, the Emerging Track offered eight sessions over the two-day event designed to be helpful to newcomers, such as “AdTrax – From Business Cards to Seminars” and “What’s the Deal With Tax Season?”
Presentations, Discussions and Consultations
Promote Empowerment at Conference in Omaha
Jim Nagengast welcomed attendees to the conference.
One-on-one consultations were available to discuss various business topics.
Assistant University and Principal Meeting Highlights
NOVEMBER 2016 | The STAR 24
The Experienced Track’s sessions included: “How to Prepare for a FINRA/SEC Audit” and “Shoes and Prospects: You Can Never Have Enough,” which discussed social media, search engine optimization, in-bound marketing and Securities America’s newest turn-key marketing campaigns.
Two of the most attended sessions in the Technology Track were “Paperless Explained” and “20 Hidden Technology Tips and Tricks,” which covered helpful techniques available in the Business Center and Advantage and from our clearing firms and technology partners.
Assistant University attendees also had opportunities to ask specific questions on topics like asset movements, the new brokerage fee tool, social media, effective websites and client events during
one-on-one consultations with Securities America staff members and round-table discussions.
Twenty-three principals and OSJs attended Securities America’s third annual Principal Meeting. In addition to an overview and discussion regarding the upcoming Department of Labor fiduciary rule,
attendees reviewed compliance tips and tools, real life examples of transaction reviews and arbitration and enforcement actions. During one of the most popular sessions, guest speakers from FINRA provided insights on the current regulatory environment.
Meeting participants networked with principals from around the country, shared their best practices and created lasting relationships. The meeting was a learning opportunity for compliance supervisors
continued on pg. 25
Attendees participated in round-table discussions.
Principals and OSJs from across the country attended the Principal Meeting.
25 The STAR | NOVEMBER 2016
and for Securities America staff, who received invaluable feedback and suggestions to improve our policies and processes. We have already begun implementing some of the suggestions made, and there is much more to come.
Attendees from both events enjoyed two dynamic keynote presentations. On Thursday, renowned author and business coach Carson Tate administered an assessment to help audience members identify their personal productivity styles and offered
practical efficiency tips for each productivity personality. On Friday, Securities America Senior Leadership Development and Training Consultant Terry Lee gave a high-energy presentation with colorful anecdotes to inspire everyone to own their personal and professional development. Although Assistant University and Principal Meeting were packed with educational sessions, the events weren’t all work and no play. Early arrivals enjoyed a lively
Carson Tate, author and business coach, helped the audience identify their personal productivity styles.
Terry Lee, Securities America Senior Leadership Development and Training Consultant, inspired personal and professional development.
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welcome reception on Wednesday evening. On Thursday night, teams of assistants, principals and Securities America staff raced to assemble 28 bikes that were presented to grateful recipients from two area Boys and Girls Clubs. Participants were rewarded for their efforts with a prime rib dinner. Friday morning’s general session began with lots of laughter as Kirk Hulett hosted Securities America’s version of the Match Game. In round one, Hunter Allmon from the Clements Group in Durango, Colo., and Jennifer Nelson from Diversified Wealth Management in St. Louis Park, Minn., tried to guess how the offbeat Securities America panelists would respond to questions posed by Hulett. Maureen Lariviere from Investment Service Center in Gothenberg, Neb., competed against Beth Hodges from Queen City Financial Advisors in Cincinnati, Ohio, in the second round.
Assistant University and Principal Meeting highlights and resources are posted on the Business Center. Go to Growing Business, then Conferences and Events and click on the respective conference. You’ll also find event photos on Securities America’s Facebook page.
Mark your calendar for next year’s event, to be held Oct. 5-6, 2017, in Omaha, Neb.
Children from area Boys and Girls Clubs were surprised with new bikes built by attendees and home office staff during a charity event.
Home office employees participated as panelists in Securities America’s version of the Match Game.
27 The STAR | NOVEMBER 2016
Brought to you by the Financial Services Institute. For more information or to become a member, go to www.financialservices.org.
Oxford Economics Study: Independent Advisors are a Key Economic Driver for Their Communities
With the United States in the thick of election season, we hear one question asked repeatedly in regards to various candidates and policies: “Who is looking out for the middle class?” Political fortunes will rise and fall across the country this November as voters decide which candidates truly understand Main Street Americans’ economic concerns and which do not.
According to a comprehensive new study conducted by Oxford Economics on behalf of the Financial Services Institute (FSI), those candidates might do well to listen
to the members of one industry in particular: the independent financial services industry.
The results of the study were announced for the first time at the inaugural FSI Forum in Dallas, which was developed to help independent financial advisors and firm executives prepare for implementation of the Department of Labor’s new fiduciary rule.
While Americans may not be as familiar with independent firms as they are with large wirehouses, they are very well acquainted with the advisors who represent the true face of the industry. As the study, “The Economic Impact of FSI’s Members,” makes clear, the majority of the 167,000 independent financial advisors affiliated with FSI member firms live and work predominantly in small and mid-sized towns in all fifty states, have strong ties to their communities and know their clients personally.
Beyond personal relationships, these advisors make up an invaluable component of the city and state economies in which they operate. By applying a standard technique called economic impact analysis
by Dale Brown, President & CEO, Financial Services Institute
Report produced for Financial Services Institute
FSI Update
NOVEMBER 2016 | The STAR 28
to data gathered from across the industry, the Oxford Economics study quantifies for the first time the independent financial services sector’s vast contributions to GDP, jobs and tax revenue in communities across the country.
The findings were eye-opening and should be required reading for legislators and regulators everywhere: the industry contributed $48 billion to GDP in 2015, along with $6.8 billion in taxes to federal, state and local governments.
The numbers go beyond employment generated directly by the industry. The study found that, for each of the 167,000 advisors mentioned above, an additional two jobs were supported in the broader economy. The total number of jobs supported both directly and indirectly by the independent financial services sector in 2015 came to over 482,000 nationwide.
Approximately $19.5 billion of the industry’s total contribution to 2015 GDP came in the form of supply chain and consumer spending activities, spreading the benefits generated by the sector to a wide range of other areas in the economy,
continued on pg. 29
29 The STAR | NOVEMBER 2016
including professional and business services ($4.8 billion); trade, transportation and utilities ($4.2 billion) and education and health services ($2.8 billion).
Among the study’s other key findings were the following:
• FSI member firms’ and advisors’ impact is disproportionately large in small and mid-sized states, which are frequently underserved by other sectors of the financial services industry. The states in which FSI members generated the greatest share of economic activity relative to the financial services industry’s total contribution in that state include Mississippi (41.0%), Maine (36.4%) and Kansas (30.9%).
• While members made up a disproportionate share of economic activity in smaller states, they had a sizeable impact on the economies of larger states, as well. In California, the economic benefit from FSI member firms came to $5.4 billion in 2015; in New York, it was $4.3 billion; in Texas, $2.9 billion.
• Independent financial advisors tend to have a substantially different demographic profile than advisors elsewhere in the industry. They are more likely to have served their country in
the military, with one in six being a veteran; tend to live in the same communities in which they work; and tend to be more highly educated than their counterparts elsewhere in the industry.
• FSI members also make substantial contributions to the economy in the form of millions of dollars in donations to national,
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regional and local charities; volunteering their time; and teaching financial literacy skills on a pro-bono basis.
The Oxford Economics study provides quantitative support for what members of our industry have always known: that independent financial advisors and firms have a unique understanding of Main Street Americans’ financial needs, anxieties and dreams, because advisors in this industry are part of the Main Street community themselves.
As FSI’s Executive Vice President and General Counsel David Bellaire puts it, “People in Washington, D.C., like to say that the plural of ‘anecdote’ is not ‘data.’ This study puts the relationship between our members and the communities they serve into a language that policymakers can easily understand and act on – hard data.”
Moreover, the study demonstrates independent advisors not only counsel members of their communities on how to pursue their goals for education, retirement and other important aspirations – they are a key driver in the economic well-being of the cities and states in which they live and work themselves.
As America’s middle class prepares to go to the polls this November, the ongoing economic anxiety of a sluggish and uneven recovery will be one of the deciding factors in the outcome of the election. As this new study from Oxford Economics makes clear, political leaders at every level – national, state and local – can put themselves in a better position to understand Main Street’s needs by developing stronger ties to independent financial services firms and advisors.
Download the full Oxford Economics study.
Send questions, comments and contributions to: [email protected]
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