Brokerage to Advisory Account Conversion
This is the last of the disclosures that we discussed on our monthly webcast last Thursday. As the SEC is auditing our broker/dealer, we were advised that we needed to develop procedures and guidance around accounts moving from the brokerage side to advisory. As with investments, advisors and the firm both have to complete a suitability analysis to determine whether it is appropriate for an account to convert from the brokerage side to advisory. Therefore, you should document these discussions with your clients in your contemporaneous notes and place the purpose of moving the account in the box in the attached form. This will be applicable not only for RBC brokerage accounts moving to an advisory account, but also for direct accounts moving to an advisory account. The BD to IA Conversion form must accompany the advisory agreement and/or any other applicable transfer forms, if an advisory agreement is already in place. The effective date for this process is April 1, 2016.
For the disclosure form, you will need to locate the approximate fees/commissions the client paid for the past 12 months (if the account was open less than 12 months, then provide only for time opened) and place the total fees on the form. Additionally, you will need to locate the last monthly statement for the client for the brokerage account and place the value and the month/year for the statement on the form. Finally, you will need to place the annualized advisory fee percentage to be charged and calculate for the client based on the account's prior brokerage account value for what the client's estimated annual advisory fees would be for the year. Michelle Hancock was kind enough to send an email to everyone last week which provided a how to in pulling RBC commission information (see attached). Regarding direct commissions/trails/fees, please provide your best estimate of this information on the form.
The purpose of the BD to IA Conversion form is to provide your clients a clear picture on the cost of a brokerage account versus a projected advisory account and to assist your clients in understanding the advantages/disadvantages in converting the account. We know that there may be additional/special circumstances for clients (adding additional funds, consolidating accounts, wanting professional money management, reducing costs, etc.) in moving their accounts and ask for you to place this information in the Purpose of Conversion box on the form. This will allow for documentation of why the client wants to move the account and will assist in the home office's review before approving the conversion and satisfy the regulators.
If you have any questions, please let us know. Thanks, Renee
BD to IA Conversion Analysis |
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