New Regs a Blessing in Disguise?

It may seem counterintuitive, but more regulatory red tape might actually mean new opportunities for advisors, at least in the case of new regulations requiring cost-basis reporting to the IRS.

Implemented this year as part of the Emergency Stabilization Act of 2008, the new rules could turn out to be a blessing in disguise for advisors who position themselves to embrace the new requirements, according to BriAnna McKee, project specialist for the Cost Basis Communication and Training Project at Raymond James. While complying with the requirements will necessitate more time of advisors and their staffs, she says, "the legislative changes can be used to build upon client relationships by being the knowledge broker and keeping them updated on changes that will affect them. It can also create opportunities [for advisors] to build their business by reaching out to their centers of influence."

Raymond James, McKee notes, will be implementing a cost basis engine, updating impacted systems and will use an "as-required" phased approach to integrate updates, to minimize the impact on advisors and clients.

Getting a strong grasp of the new rules will require some homework and training on the part of advisors and their staffs. But the upside should make that effort worthwhile, maintains David Merriam, operations manager for portfolio reporting at Raymond James. "Advisors must take the initiative to learn as much as they can about the new brokerage firm cost-basis reporting requirements, and understand the differences between what their clients will have to report on. The bottom line is that the more we know about the nature behind certain client activities, the better off we'll all be."

As for how the new regulations might translate into opportunities for advisors, Merriam explains: "The advisor is going to be at the center of a very unique opportunity to strengthen the relationship with clients across their entire book. They'll be the focal point of client concerns, so they should let their clients know in advance what is coming."

The new rules and resulting compliance effort will be rolled out in three phases, with the first phase already underway. "We've placed a strong emphasis on communication and training to provide actionable guidance to this timely issue," McKee explains. "Through proactive measures and awareness, subtle changes can be integrated into daily practice instead of learning the legislation through costly mistakes."

To support the effort, communications and training resources are available on the Cost Basis Changes Resource Center on RJnet – search: Cost Basis.