PHOENIX -- The SEC's recently proposed rule to regulate who can use the title financial advisor has FPA leaders wondering whether the regulation overlooked another important term.
"We'd like to see financial planner added to that protection," says Shannon Pike, 2018 FPA Chair.
"One of the fears could be that people might use financial planner if they can't use financial advisor," Pike says. ”And financial planning is in vogue. Look at the people in the BD world who like to use it. We certainly are going to talk very heavily within our ranks about that."
His comments are an early indication of the types of feedback the SEC is likely to get on its proposed rules, which include clarifying aspects of fiduciary duty for RIAs as well as imposing a best interest standard on brokers. The comment period closes in early May.
At the same time,
Whether or not the Labor Department's rule survives, it may have had the effect of propelling the SEC to move forward on holding brokers to a higher standard of client care. (The commission has been authorized to craft a fiduciary rule since the Dodd-Frank Act passed in 2010.) The Labor Department's regulation has also raised the profile of fiduciaries among retail investors.
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“The broker-dealer world has tried to hang their hat on suitability, and if you close your eyes a little and squint, they almost look like fiduciaries — but not really,” one advisor says.
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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 -
It appears the regulator bought into the investor choice argument of sales reps right from the beginning.
April 19 -
New rules would set standards of conduct for brokers, require new disclosures and offer interpretive guidance for fiduciary advisors.
April 18
"Being a fiduciary and being a CFP — that is out there in the public domain," says 2018 FPA President Frank Paré. Clients are increasingly better educated as to what a fiduciary is, he adds.
Wirehouses, regional brokerages and independent broker-dealers have also marshalled vast amounts of resources to comply with the Labor Department rule, which went partially into effect last year.
"One way I look at it is that there are a lot of big players out there who have done the work to be in compliance with fiduciary," says Karen Nystrom, director of advocacy at the FPA. "They've spent big bucks to do that. Wherever things end up, fiduciary is here."
Of course, the SEC's proposal is not a fiduciary rule — a fact that may trouble fiduciary advocates. SEC Commissioner Kara Stein, a Democrat, voted against the proposal because it fell short of that mark. The FPA plans to file a comment letter after reviewing the 1,000-plus page proposal and getting feedback from its more than 23,000 members.
"We'll be going out to our members, as we always do," Pike says. "Just walking the halls the last few days, I think they'll say it hasn't gone far enough."
