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Coalition Asks RIAs to Tell SEC How They Differ From Brokers

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The Institute for the Fiduciary Standard and other groups are urging RIAs to write to the Securities Exchange Commission to explain how their work differs from that of brokers.

The “Raise Your Voice” effort comes as the SEC seeks comments on proposed rules related to standards for brokers licensed by the Financial Industry Regulatory Authority and SEC/state-registered investment advisers. The comments are due Aug. 7.

“Most RIAs believe the proposed rules, introduced April 18, do not adequately explain broker and advisor differences,” according to Knut A. Rostad, president of the Institute for the Fiduciary Standard.

“The proposed rules depict broker and advisor conduct as essentially the same, like identical twins. This depiction is confusing and wrong,” Rostad explained. “The legal, contractual, business and cultural differences dividing brokers and advisors are important, and must be clearly stated and explained.”

In Rostad’s opinion, relationships with brokers involve three entities — “the company that is manufacturing and/or selling the investment or insurance products, the customer purchasing the products, and the broker in the middle who earns a commission for products sold,” he said. “On the other hand, in an advisor relationship, there are just two entities: the client and the advisor. The advisor and the broker treat retail investors in entirely different ways.”

Fiduciary advisor groups joining the institute in this effort include:

  • National Association of Personal Financial Advisors (NAPFA)
  • Garrett Planning Network
  • XY Planning Network
  • Alliance of Comprehensive Planners (ACP) and
  • The Committee for the Fiduciary Standard

“NAPFA members have a long-standing tradition of providing advice under a fiduciary standard of care to all clients, at all times,” said Geoffrey Brown, CEO of NAPFA, which represents fee-only financial professionals, in a statement. “To suggest, as [Regulation Best Interest or] Reg BI does, that fiduciary duties should only apply at the very moment a recommendation is uttered would be confusing. It would be wrong.”

Michael Kitces, CFP and co-founder of XY Planning Network, says the group of fee-only advisors (who charge clients on a monthly subscription basis) believes investors should “have a choice between a salesperson who provides only incidental advice and a financial planner who provides real financial advice.”

Fiduciary advisors wishing to comment on Reg BI can email comments to [email protected] and reference S7-08-18 in the subject line.

— Check out SEC Advice Proposals Take Center Stage on ThinkAdvisor.


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