The SEC’s Division of Examinations issued its 2025 Exam Priorities a few months ago. 2025-exam-priorities.pdf

Many articles have been written about those priorities, but none—at least that I have seen—have addressed the focus on retirees, older investors and rollovers. This article fills that gap.

The first mention of those retired and older investors is in a discussion of the application of Regulation Best Interest for broker-dealers, including dual registrants. The Exam Priorities explain:

Examinations may also focus on recommendations:(1) using automated tools or other digital engagement practices; (2) related to opening different account types, such as option, margin and self-directed IRA accounts; and (3) made to certain types of investors, such as older investors and those saving for retirement or college.

Comment: This reflects a policy concern that older investors are in a category where abuses could be more likely and that therefore warrants special focus for examination.

That discussion in the Priorities continues:

Examinations may also focus on dual registrants and encompass reviews of firms’ process for identifying and mitigating and eliminating conflicts of interest, account allocation practices (e.g., allocation of investments where an investor has more than one type of account) and account selection practices (e.g., brokerage versus advisory, including when rolling over to an IRA or transferring an existing brokerage account to an advisory account, as well as advice to open wrap fee accounts).

Comment: A rollover from a plan to an IRA, particularly for a person who is retiring,  will in many cases  be the largest financial transaction of that person’s lifetime. In other words, there is an elevated importance that the rollover decision be a good one, both in terms of taking the money out of the plan and in how it is invested in the rollover IRA. Good quality investment advice, reasonable expenses, and conflict management are important to making the right decision. After all, the retiree’s expectation is that the money will provide a secure source of income for the retiree’s lifetime.

Note that the SEC Staff has issued detailed guidance about compliant rollover practices in a staff bulletin. SEC.gov | Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Account Recommendations for Retail Investors

Later in the Priorities, in a discussion of financial technologies, the Exam Priorities say:

When conducting these reviews, assessments generally will include whether: (1) representations are fair and accurate; (2) operations and controls in place are consistent with disclosures made to investors; (3) algorithms produce advice or recommendations consistent with investors’ investment profiles or stated strategies; and (4) controls to confirm that advice or recommendations resulting from digital engagement practices are consistent with regulatory obligations to investors, including older investors.

Comment: No surprises here. Technology, including artificial intelligence, will become a more common source of investment advice and that is particularly true for the average investors who may not have the assets needed to qualify for in person investment advice. In my view, that is a good development because it will provide greater access to advice. However, the firms offering robo advice will need to stand behind the quality of the advice and, in particular, the management of any associated conflicts of interest.

Further on in the Priorities, in a discussion of investing in crypto assets, the Priorities say:

In particular, these examinations will review whether the registrants: (1) meet and follow their respective standards of conduct when recommending or advising customers and clients regarding crypto assets with a focus on an initial and ongoing understanding of the products that have a particular focus on scenarios where investors are retail-based (including older investors) and investments involving retirement assets; and (2) routinely review, update, and enhance their compliance practices (including crypto asset wallet reviews, custody practices, Bank Secrecy Act (BSA) compliance reviews, and valuation procedures), risk disclosures, and operational resiliency practices (i.e., data integrity and business continuity plans), if required.

Comment: As with an earlier comment, the Exam Division is making clear its focus on older investors and retirement assets. Forewarned is forearmed. Broker-dealers and investment advisers should review and consider augmenting their policies, practices and supervision for services to older investors and retirees.

Concluding Thoughts

This isn’t really surprising. It is the combined result of demographics, defined contribution plans, and rollover IRAs. Those are all well known.

However, the Exam Priorities are a good reminder of the combined effect of those factors and the need for practices for those investors that are consistent with a best interest standard…for care and loyalty.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

The views expressed in this article are the views of Fred Reish, and do not necessarily reflect the views of Faegre Drinker.