Fast Growing Advisory Program Presents Major Compliance Risks

Jody Cullinan, director of product management and strategy, Investment Services at Fiserv, shares her insights on rep-as-advisor programs and the steps home offices are putting in place to mitigate associated risks.

According to recent reports from Cerulli Associates, rep-as-advisor programs have been growing in popularity but present increased compliance risks for managed account sponsors and advisors.

Rep-as-advisor programs, where advisors must seek client permission before making a portfolio change, were often used as an introductory fee-based program for advisors transitioning away from commission-based business.  Experts worry once advisors get used to this type of relationship, they will more likely come across problems such as making trades without client permission and without client discretion within an account, reverse churning, and moving commission-based products from brokerage accounts into rep-as-advisor accounts.  Cullinan speaks with FundFire about the issues associated with rep-as-advisor programs and steps that can be taken to reduce risks.