I am the Chief Compliance Officer of a Registered Investment Adviser firm. This may sound impressive to your readers, but it’s not. I am a solo CFP® practitioner, but because my practice is an RIA and it’s just me and RIAs are required to have a Chief Compliance Officer. I am the Chief Compliance Officer by default, and I also take out the garbage.

I should hire you to do my compliance!

But one thing, and I don’t see this as a linguistics issue, if I am an insurance agent and have no other certs, registrations or securities licenses, they certainly can and do provide advice but technically, they get paid zero for that…right? The compensation comes from the product sale. They don’t charge, per se, for the advice. That’s prohibited as far as I understand it.

ps Are you a compliance officer? You know a great deal about this stuff.

I’m still wondering though, assuming I do decide to take the Series 65 and become an RIA, is the annual workload to stay “current” complicated?

I’m just remembering how when creating my LLC the state told me I’d have to file an “annual report”, which I was dreading the first time around b/c I assumed it was going to be a hassle. It turned out to be nothing more than going online, clicking that my address hasn’t changed, and paying a renewal bill by credit card. It takes about 3 minutes!

So I think the thing is, I am 90% sure I want to do the RIA thing. I’d just like to know first what sort of obligations I’ll be getting myself into with the SEC re: record keeping, paperwork, etc.

Thanks again for all the help.

Series 6, 7, etc. are not actually licenses. They are exams required to register as a representative with a a FINRA member firm. When someone has “duel registrations,” it usually means they are an “investment adviser representative” on a state or SEC RIA and a “registered representative” of a FINRA member firm. Some confusion stems from the overlap these roles can play relating to compensation. Even though an advisor (the person) cannot act in both capacities at the same time, they may be compensated from one to do the other (commissions for advice thats not incidental to the sale).

Non-RIA registered reps are obligated to disclose commissions; they are NOT obligated to disclose compensation.

Insurance agents or registered reps that also provide investment advice as an RIA are obligated to disclose compensation. They can be compensated by commissions for investment advice. As an example, an RIA may provide investment advice or financial planning services to their insurance clients at no additional cost other than the commissions they receive. I agree that these arrangements are loaded with conflicts of interest, but it is not prohibited as long as it’s properly disclosed. This is a similar concept to how fee-offset arrangements work.

The bottom line for consumers is that if they want assurance (beyond what’s in the ADV) from an advisor that they don’t receive any commissions or referral fees or any other third-party compensation, they should ask (in writing) if they are “fee-only.” If they are a CFP® certificant, they are only permitted to describe their practice as “fee-only” if, and only if, all of the certificant’s compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.

On Bernie Madoff, I don’t know a lot of details, but I don’t think Madoff registered his firm as an RIA until 2006. Any thing the SEC did before that would likely have been limited to his brokerage activity. I don’t know how the NASD let it happen either. I do know the Internet is full of opinions as to how, who, and why the ball was dropped. The most plausible, in my opinion: (1) regulatory gaps, (2) lack of resources to properly investigate, and (3) lack of customer complaints to create a higher priority.

“Either way, he got away with it.”

Every criminal gets away with it until they are caught.

Non-RIA’s are not obligated to disclose commissions – another reason I encourage folks to work with them.

With respect to Bernie, wow….. But then the NASD is responsible…right? How could the NASD let that happen for so many decades?
I was under the impression that the SEC had audited Bernie several times and never took action. I’m no legal expert, but I wonder why the SEC had audited him too. Maybe because he was so big.

Either way, he got away with it.

RIAs can be compensated for investment advisory services by commissions and it’s actually quite common. People can verify whether an RIA is ompensated for investment advisory services by commissions on the advises Form ADV. Part 1, Item 5.E.5 is where this would be disclosed.

Also, just because commissions are not disclosed there does not necessarily mean that the individual giving you advise does not receive commissions. It just means the commissions are not deemed compensation for “investment advisory services.” They still might earn commissions from the insurance products based on their recommendations. There are other, non-investment products or service they may earn commissions or referral fees on. This information can be found in Items 6 and 7 in Part I of the adviser’s Form ADV.

Also, Bernie Madoff was only operating as an RIA for the couple of years leading up his confession. Prior to that he operated only as a securities broker-dealer. I think that was a major contributor to why he was able to pull this off for so long. I’m not saying the SEC is off the hook, but they were not even regulating him for most of the time the fraud was going on.