As the Securities and Exchange Commission’s Regulation Best Interest goes into effect today, some industry leaders are speaking about their continued concerns — both with the SEC’s rules and with a proposal announced late Monday by the Labor Department.
The SEC finalized Reg BI a year ago to ensure that brokers adhere to the same fiduciary standard as RIAs when making recommendations to clients. But while the aim of these rules was to require brokers to act in the best interest of investors, not all believe that Reg BI fulfills that objective.
“One thing we saw there in my view was a watering down of the fiduciary standard,” said Jamie Hopkins, managing director of coaching for the Carson Group, in a video he posted Tuesday on Twitter.
“We’re going to see continued concerns around consumers’ ability to distinguish between brokers operating under a best interest and fiduciaries operating under a fiduciary standard,” explained Hopkins, an attorney and certified financial planner, who also is head of retirement research for Carson Wealth.
New DOL proposed rule – working through the 123 page document, return to the 5 part test, insurance agents can do rollover advice without being fiduciary – big concerns with this proposed rule!
— Jamie Hopkins (@RetirementRisks) June 30, 2020
Such views were argued by blogger and XY Planning Network co-founder Michael Kitces in a failed lawsuit.
On Friday, the U.S. Court of Appeals for the 2nd Circuit ruled in favor of the SEC and said “although Regulation Best Interest may not be the policy that petitioners” XY Planning Network, seven states and the District of Columbia “would have preferred, it is what the SEC chose after a reasoned and lawful rulemaking process.”
XYPN is mulling its legal options, including an appeal.
While the Investment Advisers Act “has long permitted brokers to be (non-fiduciary) brokers and advisors to be (fiduciary) advisors, and Dodd-Frank gave the SEC the option to allow brokers to become fiduciary advisors alongside investment advisors, the SEC chose neither of these paths with Regulation Best Interest,” Kitces explained in a statement emailed to ThinkAdvisor on Friday.
XYPN “will continue to be active with advocacy at the state level around the very basic principle that advice has only ever been and should always be fiduciary,” the popular blogger said on Monday.