Advisors Weigh In On Finra’s Side Hustle Rule Proposal

Kid’s little league program needs a new umpire? Play ball. 

Advisors and firms are reacting to a recent proposal from the Financial Industry Regulatory Authority that would relax oversight on advisors’ side hustles that don’t affect their work as wealth managers. The proposed rule would also tighten disclosures on their outside investments. It’s a delicate matter, but many advisors agree FINRA shouldn’t have a role in their gigs as, say, golf instructors or Uber drivers, and also feel controls over their personal investments, like buying and selling crypto, could be an overreach. 

Do the Side Hustle

The proposed FINRA rule 3290 has already received more than 70 comments, and while many support the first half of the rule, far fewer are in favor of the second half that could limit outside investments. As a replacement to FINRA rule 3270, the new rule would eliminate the need for advisors to report to their firms that they work side gigs that have no impact on their careers as financial professionals. If an advisor makes a mean rum and Coke, proponents say do your best impression of Tom Cruise in “Cocktail.” 

John Bell, who runs Free State Financial Planning, supports the change and said he works one day a week at his local golf course. He gets paid for it, but he mainly does it for the free golf. “Why should FINRA tell me what I can and cannot do when it is unrelated to the financial services industry?” he told Advisor Upside. “My answer: ‘Stay out of my business and mind your own.’” The comment period ends May 13.

Outside Investments. The second half of FINRA’s proposal, which would replace FINRA rule 3280, appears more controversial. Licensed advisors would be required to have written approval from their firms to personally buy and sell assets like crypto, commodities, derivatives, real estate, and more. And that requirement would extend to their spouses, partners, children, and anyone living in their household. FINRA argues that if it focuses its attention less on outside jobs and more on outside investment activity, it will increase investor protection. But many advisors feel it’s a confusing overstep.

“I do not understand how an advisor buying precious metal currency, a second home or life, health, auto and homeowners insurance or opening a checking account at a bank would be a risk to clients,” Daniel Forrester, an advisor with Truist Advisory Services, said in a public comment. 

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