The SEC’s proposed Regulation Best Interest may require further changes at independent broker-dealers, but, at first glance, the CEO of one of the largest firms views them as welcome developments.
“There are enough special interest groups out there that the SEC can’t come up with a rule that’s just a nod to the industry,” says Advisor Group CEO Jamie Price. “I think they, generally speaking, wanted to do something that was meaningful for clients and that could work for the industry. We think the early read is they probably did a pretty good job of both.”
Price discussed the April 18
Fiduciary advocates view the potential replacement of the Department of Labor’s rule
Since most of the advisors with the Phoenix-based firm of four IBDs now provide both brokerage and advisory services, Price says he expects Advisor Group to be largely on board with enhanced disclosures helping to educate clients on the differences between the fiduciary and suitability standards.
“Advisors have no problem adhering to a best interest standard. I mean, they actually kind of chuckle about it, like, ‘You know, that’s what I try to do every single day,’” Price says. “In many cases, advisors are probably going to hold a higher standard than the commission standard and the best interest standard with their client.”
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It appears the regulator bought into the investor choice argument of sales reps right from the beginning.
April 19 -
New rules recognize the fact that commission-based transaction services can be the most cost effective way for Main Street investors to receive financial advice.
April 19 -
If it's not uniform, and it's not a fiduciary standard, then it is at best a modest step forward, investor advocates say.
April 19 -
New rules would set standards of conduct for brokers, require new disclosures and offer interpretive guidance for fiduciary advisors.
April 18
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Price has been talking about the fiduciary rule and related issues with the private equity-backed, Phoenix-based firm’s advisors since he joined it
Advisor Group
Price doesn’t anticipate Advisor Group reversing any of the changes, regardless of the DOL regulation's fate following the Fifth Circuit Court of Appeals’
The KBW analysts predict few firms will change their practices and business models “to conform to an ‘easier’ SEC rule,” they wrote in a note after the SEC’s announcement.
“The SEC's proposal was a relatively benign outcome so, in that regard, we view it as a positive for the industry,” according to the April 18 note. “At the same time, we think most investors and observers were anticipating a proposal that relied on enhanced disclosures rather than prescriptive rules and that is what the SEC put forward. Therefore, we expect a muted market response.”
The SEC opened a 90-day comment period while unveiling the roughly 1,000-page proposal, which the analysts foresee as taking a year and a half or more to finalize into a rule. Price says he looks forward to seeing formalized responses from SIFMA, FSI and “the entire ecosystem” on the proposal.
For the time being, Price says his firm is focusing on upgrading its level of service to advisors as more of them
“Well, we blew through that in April,” Price says. “We got flooded on our operations desk, and so we have been beefing up all of our operations area.”