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Brian Hamburger: Initial registration and regulatory compliance

Submitted by kristin.mccasland on September 6, 2019

[Charles Schwab]
[Initial Registration & Regulatory Compliance]
[with Brian Hamburger]
[Advisor Services]

[Charles Schwab]
[Brian S. Hamburger, JD, CRCP, AIFA®
[Founder and Managing Director | MarketCounsel]

This is somewhat of a complex area, but I want to make sure that people understand that there is a well-worn path to independence. This is a process that's been done thousands of times before, something that people that do this each and every day are very, very familiar with. And so while they may seem overwhelming and it may seem like a complex laundry list of items, they really can be broken-down into manageable, bite-sized pieces along the way.

When we talk about registration, it's all about disclosure. So for investment advisors, it's really about envisioning the type of firm that they're looking to launch, the various services they're looking to offer, how they're being compensated both directly and indirectly, the various roles that they play within the client relationship, other conflicts of interests that may play a part in their firm, and really taking inventory of all of these things and ensuring that there's clear and concise disclosure.

Our job is often to have a meaningful conversation, a dialogue with the advisor about what they anticipate, what they want to do, and making sure that we can create disclosures that really explain it in plain English.  Our goal, effectively, is to pull this out of them, to translate it to plain English, and furnish disclosures that consumers and regulators can both feel comfortable with.

So once the registration process is underway, now it's time to backfill and get all the other essential documents in place. We're talking about policies and procedures, or a compliance manual, if you will, based upon the type of business that the advisor is going to be conducting. These policies and procedures will lay out for the firm exactly what is permissible and what has to happen under various circumstances.

The other main element that we want to put in place are a set of client agreements based upon the various services that the advisor is going to be offering. Keep in mind, from a qualitative standpoint, these agreements have to stand toe-to-toe with the firm that the advisors are departing from, often world-class global financial institutions who have a lawyer or two who have worked on these agreements. So it's important to us that these agreements look and feel on par with the firms that they're leaving. 

Now, one byproduct of all of this work—the registration, the disclosure, the policies and procedures, the client agreements—is that you bring all of this together, and you have wonderful tools to help mitigate risk that go well beyond any type of insurance that the advisor can put in place, because they're doing everything they can to adequately inform and disclose all of their business practices to potential and current clients.

Once an advisor is done peering over the fence of independence and they decide that this is something that they're ready to proceed with, it's at that time that they want to engage an advisor or counsel. There are various advisors that play a very significant role in this transition, most important of which I believe is legal counsel. Legal counsel will help structure a strategic plan for exiting, ensuring that all the essential elements are considered.

Often the transition planning process starts sometimes years before a transition actually takes place, but the nuts and bolts planning is typically… lasts between three to six months to put all of the pieces together.  Depending upon how you look at the transition, some people really set the stage and the vision years in advance and are just kind of looking for that right opportunity. 

Like many important moves in life, there's never the perfect time to leave. The most common feedback we get after a transition when we go out and canvas our advisors that have made the move to independence, the most common response we get is ‘I wish I would have done this sooner.'

[Charles Schwab]
[Disclosures
©2012 Charles Schwab & Co., Inc. ("Schwab").  All rights reserved. Member SPIC.  Schwab Advisor Services™ includes the custody, trading and support services of Schwab.

For general informational purposes only and is not intended to provide specific compliance, regulatory or legal advice. Schwab makes no representations about the accuracy of the information or its appropriateness for any given situation.  Experiences reflected are not a guarantee of future performance or success and may not be representative of your experience.

The information provided and views expressed by MarketCounsel and their representative are their own, without endorsement or verification by Schwab, and some statements have been edited.

MarketCounsel is not affiliated with or employed by Charles Schwab & Co., Inc. (0812-5222)]

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