After a year of ongoing debate and discussion, the Securities and Exchange Commission’s Regulation Best Interest (Reg BI) mandate has now gone into effect. This package of new regulations enacts new standards for broker-dealers and their associates to make sure they are acting in the best interest of investors at the time they issue recommendations.
Many broker-dealers are continuing to educate themselves about Reg BI, and trying to anticipate the impact its rules will have on their firms. As brokers consider what changes to existing operations, processes and workflows they will need to implement in order to comply with Reg BI, they should also look into the legacy technology systems on which their firms run.
A fully integrated, intuitive wealth management or financial planning technology platform that generates operational efficiencies, fosters more meaningful communication and collaboration with clients, and documents broker/client communications can help broker-dealers adapt and meet Reg BI rules — and other new regulations going forward.
Cerulli Associates reported in its U.S. Advisor Metrics report for 2019 that a “lack of process mapping and documentation” is one of the top three challenges to productivity faced by financial services firms. For firms with more than one broker, this is an even bigger problem, with “inconsistent procedures across multiple advisors within the same practice” also listed by Cerulli as a major challenge.
A single digital ecosystem with uniform procedures and process mapping for all brokers within a firm, and a document vault where client-facing presentations and reports outlining recommendations can be easily accessed by both brokers and clients, are key for increasing transparency and ensuring compliance with Reg BI and similar legislation.
Modern wealth management and financial planning platforms can also enable brokers to customize reports for clients to comprehensively document why certain recommendations are in clients’ best interest, based on financial plans and long-term goals. In addition to archiving these reports in document vaults available in client portals, today’s integrated technology stacks can also allow brokers to walk clients through their justification for recommendations — which can include anything from certain types of assets and accounts to hold recommendations on trades — using interactive presentation tools in client portals.