From a legal perspective, what is likely to be coming down the pike for plan advisors? David N. Levine, a principal with the Groom Law Group, Chartered, in Washington, D.C., sees four business trends with potential legal compliance impacts on advisors.
1. Mergers and Acquisitions in the Advisor Space
Merger and acquisition activity has been increasing because of cost pressures, regulatory changes like the conflict-of-interest regulation and regulatory pressures, Levine notes. Additional enforcement activity, whether involving the SEC, FINRA and/or DOL, is clearly on the radar. The key: Advisors need strong compliance policies.
“SEC compliance policies have long been a staple of compliance activities,” according to Levine. “And ERISA compliance procedures are continuing their parallel rise and are high on many advisors’ internal compliance radars for 2016.”
2. Wellness
From a legal perspective, the key items for an advisor to focus on are:
- who is paying for a wellness program;
- how it is being paid for;
- how the advisor is being paid; and
- whether the program is consistent with the legal requirements for the funding source (such as 401(k) plan assets) paying for the program.
3. Fee Disclosure and the Next Stages of Unbundling
Unbundling will continue and possibly expand under the DOL’s conflict-of-interest rule, Levine notes, and is already affecting advisor services themselves. From a legal perspective, “As advisors diversify their service offerings — from wealth management to individual investment advice — the development of prohibited transaction exemption strategies to avoid potential regulatory compliance exposure will be necessary as advisors move forward,” he cautions.
4. Money Management and the Advisor
As part of the unbundling trend, more and more advisors are managing money or playing a role in investment structures, says Levine. There are many approaches being adopted, he notes, but “a key legal takeaway is to remember that moving beyond a classic ERISA section 3(21) fiduciary role — whether in a managed account, a collective investment trust or in a multiple employer plan or other collective vehicle — results in potential ERISA conflicts and liability if the activity is not closely vetted.”
Levine’s commentary can be found in the spring issue of NAPA Net the Magazine. In addition to his regular “Inside the Law” column, the spring issue of the magazine includes the cover story on NAPA’s top plan advisors under 40, as well as feature articles on custom TDFs and the Obama administration’s take on open MEPs. The issue also features insights from regular contributors Jerry Bramlett, Steff Chalk, Nevin Adams, Warren Cormier, Brian Graff, Don Trone, Joseph DeNoyior, Jania Stout, Fred Barstein and Lisa Greenwald Schneider.
To view Levine’s column, click here and select “Legal Implications of 2016 Trends in the Advisor Communnity.” And to view a pdf of the full 56-page issue, click here.
