Finra’s 2012 suitability rules provide advisors with even more incentive to learn about alternative investments.
“Understanding risk exposure is where the financial advisor’s focus needs to be,” said Dev Modi, an attorney with Lyon, Glassman, Leites & Modi LLC in Florham Park, N.J. “Using back office resources, such as research, is one of the benefits of being aligned with a broker-dealer because there’s only so many hours in a day that allow advisors to research, attract new clients, manage their existing clients and make investments.”
Under FINRA’s suitability rule, customer information requirements were expanded and now apply to more transactions. It requires a broker-dealer or their associated persons to have a reasonable basis to believe a recommended transaction is suitable for the customer based on information obtained through reasonable diligence to understand a customer’s investment profile.
“We start with the products that LPL has approved for our platform,” said Erik Johnson, the LPL advisor. “These recommendations benefit my business because LPL does the ground work as far as looking deeply into all the companies that are out there in the retail space. As a small business, it’s valuable that the offerings are pre-screened for financial, compliance and legal issues.”