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Regulation and Compliance > Federal Regulation

What BD Execs Expect From Reg BI

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There’s plenty of anticipation and concern with the expected approval Wednesday of the Securities and Exchange Commission’s Regulation Best Interest, which aims to stop commission-based brokers from putting their interests ahead of their clients’.

How do independent broker-dealer leaders feel about the pending rules? To find out, we asked more than 40 executives as part of the Investment Advisor’s 2019 Presidents Poll.

More than two-thirds, or 68%, of the IBD leaders say the new regulations will cause confusion and challenges. The remaining 32% of execs are evenly split between those who are unsure about Reg BI’s consequences and those who do not believe confusion and other challenges will result.

When asked about the financial impact of new compliance procedures tied to Reg BI, just 27% view the expected shock to be minor; another 27% are unsure about the level of impact. Close to half of IBD leaders polled, or 46%, do not predict a “minor” impact on their costs and business activities.  

Still, while a majority sees some bumps ahead from Reg BI, just slightly more than a third, 36%, say it will significantly affect their business overall. Other IBD executives see insignificant change, 33%, or are unsure of how serious the shifts will be, 31%.

Losing Sleep

While IBD leaders seem to be somewhat split in their views of how significant the impact of Reg BI will be, they are more unified when it comes to headaches that both their advisors and their staff have due to major compliance demands, such as this new best interest regime.

Nearly 80% of executives polled say compliance keeps their advisors up at night. That concern comes ahead of business growth, adjusting to new technology, coping with market volatility and picking the best business model.

As for themselves, more than half — 52% —of IBD leaders say that they need to do more and spend more on regulatory issues; in other words, compliance is the No. 1 concern that keeps them up at night.

This worry causes more lost sleep than anxiety tied to new technology and other competitive issues.

IBD executives’ level of concern with regulatory and compliance matters, of course, translates into greater spending plans for 2019. However, when asked about specific spending priorities, reg issues are second to tech.


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