PLANADVISER - January/February 2020 - 12

trends
Make Way for
Self-Promotion
Still, the new SEC advertising regulations
warrant caution
THIS past November, the Securities and Exchange Commission
(SEC) voted to propose a set of amendments meant to
modernize the advertising rules and restrictions applying to
financial advisers under the Investment Advisers Act of 1940.
In a phrase, the SEC is seeking to move from a blanket
prohibition-based approach to a more nuanced and modernized
principles-based scheme-a meaningful change in
policy the financial services industry has long advocated.
The extensive rule amendments appear in summary form
on the SEC's website and in full on the Federal Register.
Among other changes, the proposed approach would
permit the use of testimonials, endorsements and third-party
ratings-subject to certain conditions-and would include
tailored requirements for how to present performance results
based on an ad's intended audience. Early industry interpretations
of the proposal have broadly been positive. According
to Ted Angus, an executive vice president and general counsel
at AssetMark, the new proposed rule " flips the advertising
standard on its head, " freeing advisers to tell their stories in
both traditional and digital media.
Angus and other commentators stress that the SEC,
while allowing advisers to do more advertising, is by no
means eliminating all pertinent compliance expectations-
far from it. Referring to the allowance for such commendatory
ads, Angus says, " That's a big step forward for the
industry. At the same time, firms still have to pay careful
attention to the advertising they're doing and keep accurate
and comprehensive records. Furthermore, you still
can't make untrue statements or permit the use of any
misleading communications. You have to make sure that
whatever advertising you do meets the new standards.
It's not a free-for-all, and the new rules don't significantly
change the recordkeeping requirements. "
Sources agree that the SEC's proposed recordkeeping
requirements remain fairly burdensome, especially when
it comes to the management and oversight of social media
marketing.
Attorneys at Stradley Ronon say the SEC's separate, but
related, proposed amendments to the Solicitor Rule are also
significant. Most notably, they say, the revised Solicitor Rule
would encompass non-cash compensation arrangements;
apply to private fund investor solicitation arrangements;
eliminate the current requirement that a solicitor provide a
copy of the associated adviser's Form ADV Part 2A to solicited
prospects; ease the solicitor's brochure delivery requirement
in connection with certain mass solicitations; and revise and
expand the list of disciplinary events that disqualify a solicitor
from receiving compensation. -John Manganaro
Allocations to Self-Directed Brokerage Portfolios
n Mutual funds n ETFs* n Cash
39%
36%
17%
12%
Baby Boomers
*Exchange-traded funds.
20%
14%
Generation X
16%
Millennials
Source: Charles Schwab
34%
24%
What 4% Rule?
10.1%
4%
Many U.S. investors think they
can withdraw 10.1% per year
in retirement and not run out of
money, while experts suggest
a drawdown of 4% annually.
Source: " Schroders Global Investor Study 2019 "
12 | planadviser.com January-February 2020 Art by Sam D'Orazio
http://www.planadviser.com
PLANADVISER - January/February 2020

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