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In my 40 years as a securities training educator, I have seen varying levels of success among advisors when it comes to understanding the regulatory and legal requirements for their jobs. The consequences of not knowing or understanding those rules and risks can be severe for advisors and devastating for their clients. The new Investment Advisor Rep (IAR) continuing education (CE) requirement isn’t just more training required by regulators; it’s an opportunity for advisors to start or continue on the right path with clients.
In 2020, the amount of assets under management by advisors totaled $110 trillion. Whose money is this? Well, much of it sits in the retirement savings of millions of Americans. Before this new IAR CE requirement, investment advisor reps had no imperative to maintain education on compliance, ethics, legislation or any other topics related to their job performance. If an IAR is registered in other capacities or has a professional designation (e.g., CFP), they may have CE related to those aspects of their job. But it’s not targeted to their investment advisory business. Anyone in the wealth management space who charges fees based on assets managed is only now required to take courses to stay up-to-date on the rules, regulations, and product suitability related to their work.
Does this mean that IARs have not been staying current and compliant in their jobs? No, it just means they haven’t had to take courses as working professionals before, and now they will be required. Given the complexity of the regulations and financial products that investment advisors must follow, a structured way to continuously learn can only be a boon.
Of course, I’m biased as an educator. Yet, I’ve seen many negative consequences of advisors not knowing rules and suffering because of it. Think of managing investments like air traffic control rules – a violation could go unnoticed and a major crash could result. Making the most of learning and training for those in the financial sector has been my lifelong pursuit, and it is quite rewarding to help advisors learn the nuances of their profession.
The North American Securities Administrators Association (NASAA) model rule on investment advisor representative continuing education states that IARs are required to complete 12 CE credits annually to maintain their IAR registration. The requirement includes six credits of products and practices content and six credits of ethics and professional-responsibility content. IARs who are dually registered as registered representatives with FINRA are only required to complete six credits of ethics and professional-responsibility content. Each state has its own timeline for completing the requirement, and not all states are required to adopt it. I recommend reviewing the NASAA website for the latest updates.
There are many courses advisors can take for IAR CE. Due to numerous cases of financial exploitation of senior investors, the SEC, FINRA, and state regulators have made it a top priority to ensure that firms are looking out for older investors and recommending only suitable securities to them. Courses related to elder financial management can fulfill IAR CE while also protecting advisors and their clients from being the next bad example in the press. Ethics courses are also filled with examples based on real-life scenarios, with names changed to protect actual professionals. Insider trading and the potential misuse of material, non-public information (MNPI) have been a consistent focus of the SEC’s examination and enforcement programs. Courses on insider trading will help advisors understand appropriate and ethical responses to these scenarios.
Overall, IARs can tailor their CE courses to their interests and business models.
It’s a good move to require CE for IARs, and there are plenty of useful courses to take that offer relevant insights into the day-to-day experiences, challenges and opportunities of managing investments for others.
Todd Rosenfeld is chief learning officer at Securities Training Corporation (STC), the market leader in securities and insurance training. STC currently offers 20 IAR CE courses, as well as both six-hour and 12-hour bundles.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
