Financial Planning and Investment Advice Who’s Playing in Who.pptVIP

Financial Planning and Investment Advice: Who’s Playing in Who’s Sandbox? Denver Estate Planning Counsel Mark McLennon November 15th, 2007 Where it all started: The Investment Adviser’s Act of 1940 Purpose of the Act What is the standard of care and what are related responsibilities? Registration Fiduciary Standard Disclosure, Disclosure, Disclosure Other Requirements State Registration versus the SEC More Background… Who an is investment adviser? SEC Release No. 770 (1981) Securities Advice “In the Business” Compensation Exceptions: Attorneys, accountants, professors, press, etc… Section 202(a)(11)(A)-(F) Broker-Dealer exception: No special compensation Any advisory services are “solely incidental” to their… business The Second 50 Years… Consumerism The Tulley Report The so-called “Merrill Lynch Rule” Growth of fee-based business Anecdotal expansion of the financial planning approach Full-service brokers and other advisors have grown their fee-based account businesses substantially over the past decade to over $1 trillion… In simplistic terms, there were four types of fee-based accounts, all with relatively similar pricing models The Writing on the Wall? NASD Notice to Members 03-68, November, 2003 FPA rumblings December, 2004 January 14, 2005 The New SEC Rule (2005) Fee-based brokerage accounts do not require registration as an adviser However, must register as an RIA/IAR if you provide “investment advice” Exceptions apply, including if you provide advice that is “solely incidental” to your B/D activities “Solely incidental” has never been defined… until April 12, 2005 What is NOT “solely incidental”… Provide advice as part of a financial plan… and… Hold yourself out as a planner… Deliver to the customer a financial plan… or… Represent that the advice is part of a plan… What is “financial planning”… Identifying long-term goals… Analyzing current situation… Preparing comprehensive program to achieve those goals… Looking at insurance, savings, taxes, estate pl