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Regulation Insights

Advisors who embrace regulation not only mitigate risk but may gain a competitive advantage. After all, for advisors to provide value, they must be able explain how a portfolio lines up with their clients’ preferences and goals. The advisor-client relationship must be built on trust and clear two-way communication of goals, risk tolerance, and other preferences. Unpacking the latest regulations with clients only bolsters the relationship.

In 2021, the SEC established a rule limiting the advertising and solicitation practices applicable to advisory firms. The new rule expands the existing definition of “advertisement” to any advisor communications and aims to mitigate the use of untrue, misleading tactics and information in advertisements, among other things. What that really refers to is the use of hypothetical scenarios, which can lead to unrealistic expectations for a client.

New regulations are found in every corner of the industry. Advisors now face greater scrutiny with their handling of 401(k) rollovers and IRAs. These regulations aim to ensure Main Street investors have access to unbiased and effective advice for their retirement savings.

Morningstar’s suite of business products includes a variety of products that make selecting and managing a portfolio easier while maintaining regulatory compliance, like Morningstar Advisor Workstation.

Check out additional insights below.