The Securities and Exchange Commission (SEC) released a statement last week announcing a multi-year targeted review of investment advisors and broker dealers’ retirement planning sales practices. This review serves to fulfill the promise that the SEC made to protect retirement savers and protect them against predatory sales practices that could do more harm than good to workers that have been saving up for retirement for decades.
Purpose of the Review
Now more than ever, many people saving for retirement are dependent on their investments for retirement income. Because this industry is incredibly complex and ever-changing, it is important to have an advisor explain and manage your retirement accounts. However, the complexity of the industry also allows for some advisors to take advantage of the system and invest retirees’ money for their own best interests, and not their clients’. This is where the SEC plans to step in.
The review will be performed by the SEC’s Office of Compliance Inspections and Examinations Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative. The purpose of ReTIRE is to focus on high risk areas of investment advisors and broker dealers’ sales, investment, and oversight processes. In particular, the ReTIRE initiative will be looking at areas where the retiree might be harmed by the risky practices.
The ReTIRE program will review whether advisors and dealers have a reasonable basis for recommending certain investments and strategies, whether they are disclosing any conflicts of interest, if proper supervision is taking place, and if they have the correct compliance controls. Marketing and disclosure of investment products are also targets of the review. In addition, SEC exams will focus on the activities of investment advisors, broker dealers, and branch office practices in order to instill these ideas with everyone entering the industry.
How the Review Works
Those selected from the SEC to take part in the ReTIRE initiative will be looking at advisor and dealer consistency when selecting each type of accounts, performing due diligence on investment options offered, the initial investment recommendations, and ongoing account management as priorities this year. In addition, plans are being made to review advisors and dealers’ sales, account selection practices, fees charged for practices, services provided, and the expenses associated with these services to ensure that investors are not being overcharged.
For reviewing supervisory and compliance controls, the ReTIRE task force will review control procedures, oversight, and supervisory policies. Particular attention will be paid to branch offices and representatives that have other business activities outside of the office. Marketing and disclosure materials will also be reviewed to ensure that investors are not misled or deceived by the advisors.
In order to check all of these various aspects of advisors and broker dealers’ business practices, the SEC plans on using data analytics, information from prior forms and exams, and examiner due diligence on all investment advisors identified in the ReTIRE probe. The SEC hopes that the ReTIRE initiative will encourage advisors and dealers to reflect upon their investment practices, policies, and procedures in order to improve them as needed.