Perspective for Advisors: Best Execution

Registered investment advisors (RIA) who purchase fixed income securities for clients, should have best execution in the forefront of their minds.

In July 2018, the SEC Office of Compliance Inspections and Examinations (OCIE) issued a risk alert detailing a list of deficiencies seen in various RIA best execution policies and procedures.  Additionally, the SEC watchdog, FINRA, included best execution in its 2019 examination priorities.

These recent regulatory notices and the impending “Regulation Best Interest” rule strongly indicate regulatory scrutiny regarding best execution is here to stay.

Authenticating best execution is a tedious and cumbersome process, especially in the fixed income market, where there are thousands of different issuers and bond structures.  In the municipal bond market alone, there are over 50,000 issuing authorities.

Utilizing the proper execution platform is another important consideration.  Simply purchasing(selling) bonds from(to) an advisor’s custodial platform may prove to be insufficient from a best execution standpoint and begs the question, “Has the bond market been adequately shopped?”  It is up to the advisor to ensure their clients have wide market access and to satisfy their best execution responsibilities.

For these reasons many advisors look to Bernardi for help with best execution within the fixed income markets.  We offer different platforms based on the advisor’s needs.  Those looking to:

  • outsource fixed income investing:  utilize fee-based Bernardi Asset Management (BAM).
  • manage their fixed income in-house:  utilize Bernardi Securities’ (BSI) trading desk for primary market access, additional secondary market access, and other resources.

Bernardi’s best execution procedures are intricate.  Bond pricing is analyzed across similar state, coupon, rating, and issue structures.  Past trading prices, current offerings prices, and new issue levels are compared by experts focused only on the fixed income market.  Markets are viewed across execution platforms including:  Bloomberg, alternative trading systems (ATS), brokers-brokers, broker-dealers, and BSI’s trading desk.  The process is extensive and exhaustive, but it is necessary.

The burdens of best execution are real, and they take time away from advisors’ day-to-day role of helping their clients with their broader financial plans.  Bernardi’s experience and role as an expert in fixed income markets is utilized by advisors to help ease some of the best execution burdens.

Please give us a call to learn how Bernardi can help you meet your best execution responsibilities and build customized fixed income portfolios for you and your clients.