Investment Advisers Pay Dearly For Regulatory Compliance

According to a survey by Investment Adviser Association and the CFA Institute, the median annual cost to registered investment advisers for regulatory compliance is $100,000. For smaller RIAs focusing on high net worth clients, the median costs are $7,500 to $15,000.

James Eccleston, quoted in the article, said that a good compliance approach is "aspirational, inspirational and perspirational." That said, his law firm, Shaheen, Novoselsky, Staat, Filipowski & Eccleston, offers investment advisers an annual compliance retainer program that includes an annual, on-site audit as well as a designated number of attorney hours, for $10,000 to $20,000.

Advisers must comply with a "flurry of regulations", according to Wealth Manager magazine. Compliance topics must include:

Managing Conflicts of Interest
Custody
Proxy Voting
Document and Email Retention
Code of Ethics
Regulation S-P (Privacy)
Anti-money Laundering
Disaster Recovery Plan
Best Execution
Soft Dollar Practices
Allocation of Investment Opportunities
Principal and Cross Transactions
Affiliated Brokerage
Wrap Fee Programs and Hedge Funds
SEC and State Examination Counseling
Securities Arbitration, Litigation and
Disciplinary Action Defense

Source: Bloomberg Wealth Manager, May, 2006