The Worst of Both Worlds? Dual-Registered Investment Advisers

66 Pages Posted: 22 Apr 2019 Last revised: 28 May 2019

See all articles by Nicole M. Boyson

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Date Written: May 3, 2019

Abstract

A 2007 surprise ruling by the Washington D.C. Court of Appeals required brokers to convert their fee-based brokerage accounts to Registered Investment Adviser (RIA) accounts. As fiduciaries, RIAs must place client interests first. These dual-registered investment advisers (DRs) have numerous conflicts of interest including affiliated mutual funds, insurance cross-selling, and mutual fund revenue sharing. Further, DRs appear to charge retail clients higher fees than independent RIAs, and regulators frequently discipline DRs. Finally, DRs invest RIA client assets in institutional classes of the same underperforming mutual funds they offer brokerage clients. Hence, many DRs may fall short of the fiduciary standard.

Keywords: conflicts of interest, registered investment advisers, brokers, dual registration, mutual funds

Suggested Citation

Boyson, Nicole M., The Worst of Both Worlds? Dual-Registered Investment Advisers (May 3, 2019). Northeastern U. D’Amore-McKim School of Business Research Paper No. 3360537. Available at SSRN: https://ssrn.com/abstract=3360537 or http://dx.doi.org/10.2139/ssrn.3360537

Nicole M. Boyson (Contact Author)

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4775 (Phone)

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