Sussman says that probably would be more a function of supply and demand rather than complexity of services offered. "It'll cause a lot of auditors to get out of the business of auditing broker-dealers because they'll have to be reviewed by the PCAOB rather than their own peers," Sussman says. "That's a stricter degree of peer review, and a lot of small accounting firms won't want to go through that." The result: Auditors could charge higher fees.
Kanjorski's amendment, originally introduced to amend Sarbanes-Oxley regulation, was rolled into the Investor Protection Act that was passed by the House Financial Services Committee last month and is slated for debate on the full House floor in December.
Debate Over Investment Advice Continues
(Dow Jones) The protracted debate over who can provide investment advice to retirement plan participants won't get resolved until well into next year. The U.S. Department of Labor has once again pushed back the effective date of rules meant to clarify this contentious issue until May 17. The department said it needs more time to analyze questions of law and policy. The effective date has been subject to repeated delays that reflect the procedural and substantive challenges of crafting regulations that give workers access to unbiased investment advice.
Phyllis Borzi, assistant secretary of the department's Employee Benefits Security Administration, has said that investment advice regulations issued early this year by the outgoing Bush administration "went too far in permitting investment advice not specifically contemplated" in the Pension Protection Act of 2006. She said the department wanted rules that were more closely in line with the act. Borzi didn't make clear exactly which, if any, specific provisions troubled her department. But attorneys expect the revised regulations to eliminate or scale back the most controversial elements of the Bush administration's proposal. Among those were rules that allowed the compensation of employers and affiliates to vary with the investment options a retirement plan participant chose, as long as the compensation of the individual providing the advice didn't vary.
Attorneys expect the reworked rules to require that the compensation of both advice providers and their employers be level. If also applied to affiliates, a level-compensation requirement would restrict the ability of financial advisors affiliated with investment companies whose funds are offered in a retirement plan to advise participants in that plan. Such a restriction would likely benefit independent financial advisors who don't sell investment products.
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Despite Downturn, Advisory Firms Are Beefing Up
Most financial advisors will remember 2008 (and early 2009) as the year from hell when plunging markets hammered assets under management and increased demand for client service meant rising workloads and expenses. But according to a recent study, a number of firms planned to take advantage of the upheaval by adding staff to capture market share when the good times return.
The report by FA Insight, a financial services industry consulting firm in Tacoma, Wash., led by former consultants at Moss Adams, found that 8% of firms planned to cut staff this year following last year's turmoil versus 29% who said they intended to increase staffing. Adding staff is one thing, but FA Insight finds that the most successful advisory firms leverage that by making formal training programs available to their employees and are more likely to offer them across every position group.
The most successful firms are also more apt to give raises, despite an uncertain economy. While most respondents said they didn't anticipate adjusting salaries this year, of those who did, more said they'd be increasing rather than decreasing them.
Raising salaries is no small order in the wake of 2008, when average overhead costs as a share of revenue jumped to 45%, or roughly five to ten percentage points higher than the typical firm experiences in more normal times. "Whether in good times or bad, human capital must be viewed as an asset that is constantly invested in, nurtured and allowed to grow in order for firms to enjoy long-term success," says Eliza De Pardo, principal and director of consulting at FA Insight.
In the report, De Pardo and FA Insight's co-principal and research director, Dan Inveen, set some parameters to align compensation with performance. One suggestion: linking incentive compensation to performance-based objectives for every position at a firm. Another is if a firm funds incentive pay through either a profit- or revenue-based pool, they should implement a hurdle to activate that pay.