Sheryl Garrett

Editor’s note: This article first appeared in Human Capital, a newsletter by Washington Bureau Chief Melanie Waddell about the people who shape the financial regulatory space.

This week’s Human Capital spotlights the chorus of industry practitioners who are calling on their fellow advisors to raise their voices and tell the Securities and Exchange Commission in “passionate and personal” comment letters how the agency’s current Regulation Best Interest (Reg BI) proposal must change.

The clock is ticking. The securities regulator will stop taking comments on its advice standard package, which includes Reg BI, on Aug. 7 — and MarketCounsel CEO Brian Hamburger doesn’t see that date being extended.

The group behind the “Raise Your Voice” Campaign — assembled by Institute for the Fiduciary Standard President Knut Rostad — includes advisors that have been on both sides of the fence (brokerage and fiduciary advice).

During a Wednesday press briefing, all of the Raise Your Voice participants said Reg BI must change.

The crux of the complaints: that “best interest” is not clearly defined in the SEC’s plan, the reg falls short of a true fiduciary standard, and the term “best interest” will further confuse an investing public about the true nature of fiduciary advice.

“This [Reg BI] is just regulation gone wrong,” said Sheryl Garrett, head of Garrett Financial Planning Network, which prides itself on giving advice to folks of all walks of life.

The group’s rallying cry is to spur advice professionals that have been non-fiduciaries and fiduciaries to come forward and say adhering to a fiduciary standard “has not hurt me in a business standpoint,” Garrett continued. “The argument about the [fiduciary standard] being so problematic and you can’t do business and it will make it impossible for middle income or people with more modest means to have access to a financial advisor – I call bull hockey to that.”

Under Reg BI, “the broker community can pretty much do what they’re doing today,” argued Rostad.

“We’re in a situation where the SEC is proposing to continue to blur the lines [between brokers and advisors] and … remove the ramifications for the client deciding whether to work with a broker or an advisor. We at MarketCounsel say it’s not too late to come up with the right answer,” added Hamburger.

“The only way that [Reg B] is going to change, and I mean the only way, is passionate voices like ours that give personal stories,” added Patricia Houlihan with the Committee for the Fiduciary Standard.

You can see the current list of comments that the SEC has received here.

Rostad and other Raise Your Voice group members anxiously await comments to flood the agency in response to the campaign.

But talks Rostad has had with SEC Chairman Jay Clayton regarding Reg BI left this impression: “Our sense is that he [Clayton] believes he has threaded the needle between the two sides in what he’s done in these 900 pages” of the agency’s advice standards package, “and he’s very confident that he’s done the right thing. It’s not clear to us that he believes there needs to be major changes” to Reg BI.

That being said, he’s only one vote, Rostad added, and opinions aired by the other sitting commissioners maintain “there needs to be major reconstruction.”