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Retirement Planning > Social Security

A Sad Statement of Leadership

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As you may have heard, the Securities and Exchange Commission (possibly in an effort to do something consumer-oriented of late) has proposed changes to its Regulation S-P, that is, the guidelines for RIAs and registered reps to safeguard personal information and the privacy of consumer financial information. It’s about time. The financial advisory industry has changed dramatically over the past 20 years or so: the sales mentality of B/D-employed brokers has largely been replaced (at least if you listen to the hype) by client-oriented advisors, morphing the “Who owns the client?” question into “What’s best for the client?”

Yet this new consumer-friendly approach has yet to trickle down to the bottom line at many firms, particularly when it comes to registered reps switching B/Ds, or advisors leaving the corporate RIA and talking some of “their” clients with them. I have to admit acts of blatant self-interest by the wirehouses don’t surprise me (nor probably many of you), but when even independent advisors start acting more like business people and less like professionals by trying to prevent clients from going with the advisor of their choice, it’s time for somebody to do something.

Surprise, surprise, that “somebody” has turned out to be the SEC. (I should note here that the only organization in the independent advisory community to take a position on the growing problem of “What’s right for the clients?” is the new kid on the block: the Financial Services Institute. Kudos, Dale Brown.)

Now, the SEC changes to Reg S-P are only in the proposal phase, with comments open until May 12. And they’re not a perfect solution, by any means: the only client information that a departing broker or advisors would be permitted to take with them would be limited to “a customer’s name, a general description of the type of account and products held by the customer, and the customer’s contact information, including the customer’s address, telephone number, and e-mail information.” What they couldn’t take would be a client’s account number, Social Security number, or securities positions which, call me crazy, would greatly aid in the transfer of client accounts.

But it’s way better than the old position of no client data at all, no way, no how. Moreover, it’s the beginning of recognizing that the clients’ interests do indeed need to come first, even as independent advisory firms grow into financial services firms themselves.


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