In a recent edition of Regulatory Compliance Watch, Robert Moreiro offers timely advice for SEC-registered investment advisors involved in wrap fee programs – namely to review advisor disclosures around compensation. The author of “Zero Commissions and Wrap Fee Programs” quotes Moreiro extensively in cautioning IAs that the Securities and Exchange Commission is laser-focused on compensation-related issues in exams and enforcement.
IAs Need to Spell Out Expenses
Moreiro and other experts quoted in the article urge firms to concentrate on providing full and fair disclosures that spell out program expenses, such as fixed-income mark ups and trade away fees. The SEC wants to know advisers have justified each item included in their fees, such as expenses tied to financial planning, portfolio management or advice concerning the selection of other investment advisors.
Don’t Just Disclose, Analyze
Full disclosure, says Moreiro is only part of it. He insists IAs should also do a business analysis that asks whether it’s worth it to have the wrap fee at all. Advisors need to ask and answer these questions, because the SEC will.
Wrap Fee or Wrap Free?
He adds, “Your fiduciary duty compels you to consider if clients would be better served outside of a wrap fee program. I would urge compliance officers to create reports that either justify keeping clients in wrap fee programs or argue they be moved out. It is very difficult for advisors to defend 2-3% wrap program fees, and the SEC may be poised to launch an enforcement or initiative.
“Zero Commissions and Wrap Fee Programs” originally ran in the April, 11, 2025 edition of Regulatory Compliance Watch. You can read it here.
