Another regulation that brokers adhere to, but will likely come now to RIAs, is the mandate that the firm has a documented business succession plan in the event the advisor dies suddenly or otherwise becomes incapacitated. The risk is that many RIAs are smaller shops dependent on the advisor, and clients would be at risk if that person could no longer run the business.
The previous chair of the SEC, Mary Jo White, said the rule was a priority, but she never made it happen. “Having those plans in place is not only common sense but can make your clients feel more comfortable,” said Karen Nystrom, director of advocacy for the Financial Planning Association.
While surveys suggest most advisors are aware of the coming rule, less known is the fact that the SEC will charge a firm with fraud if they don’t have a documented plan in place, according to Skip Schweiss, head of RIA advocacy for TD Ameritrade Institutional.