I had sold my financial planning practice and retired.  But a group of CPAs has pulled me back into the mix.  I have let my licenses lapse, but they didn't want to sell investments anyway.  However, in the marketing meetings the term "portfolio construction" has come up. Some of the CPAs are concerned that those words come dangerously close to "investment advice" thus needing an RIA.

 I don't know where to draw the line, is MPT "investment advice" or is it naming a product.  Would it be better to just ignore that portion of our holistic advice?

Can anyone provide me some feedback?

Brian

Brian,

You have entered into an area which is subject to a lot of debate at present, given the repeal of the fee-based brokerage accounts rule (following the FPA vs. SEC decision of March, 2007), the repeal of the Dec. 2005 no-action letter, and lack of SEC guidance since then as to whether financial planning is subject to the Advisers Act.

Interestingly, it appears that SEC Release 1092, available at http://www.securities.state.oh.us/SECReleases/SECRel1092.pdf, may be the controlling authority right now.  This release takes a somewhat expansive view of the application of the Advisers Act to financial planning activities.

Another resource can be found at http://www.liftburden.com/whoRIA.pdf, a nice little piece by The Consortium, which essentially explains 1092 and when registration is required.

I believe that "portfolio construction" - if applied to individual client portfolios and advice on same is hence provided to clients for compensation in some form - is clearly providing investment advice, and requires registration as an RIA.  Note, however, that there is a de minimis limit in each state, but even then certain criteria may need to be met - such as not "holding out" as giving portfolio/investment/financial planning advice.  My conclusion is the same regardless of whether any products are (or are not) recommended.

Others may have a different opinion, or additional insight.

If you determine to proceed with such activities, but not to register, I recommend that you get a written opinion from a securities compliance attorney (not a general practictioner) to the effect that, based upon the specific facts of what you are doing, you don't need to register.  (Having a legal opinion does not necessarily protect you, but it helps in several respects.)

Ron