The SEC needs to clean up its semantics before accusing RIAs of inflating AUM

Some noted exceptions to the Variable Contracts comment. We find that in the circumstance where a financial planner is dual registered as both a RIA/RR and has entered into an advisory agreement to provide financial planning services for a fee it could be interpreted that even Variable Annuities (because they are defined as a security) and additional services offered under the RIA planning engagement, may subject those assets to inclusion. We surmise that regardless of commission compensation or the absence of fee based compensation, would not necessarily exempt those assets. Further, if the Annuity owner has allowed the RIA/RR specific rights to discuss the contract with the issuer and allow investment direction may likewise subject those assets to the SEC definition of AUM. From our review the RIA compensation method can be potentially used as proof of a supervisory relationship when an advisory fee is changed the client, but lack of feed based compensation or the presence of commission based compensation does not exclude such assets. One must examine the client relationship, and if the client has engaged the Advisory Representative under a planning engagement, it may require an examination of the services provided under such agreement. If routine monitoring and updating of the financial plan also includes the re-evaluation of assets or regular rebalancing to a target allocation, inclusion may be triggered. In these examples an advisory relationship may exist and could subject commission based brokerage accounts or variable contracts to inclusion of AUM. So, what is included when an advisor is doing the calculation? We contend it is Covered Assets under any SEC definition of rendering investment advice, supervision, or direction over any security, regardless of compensation.