(Washington)

Brokers pay attention—a major loophole in the SEC’s best interest rule has just become apparent. One of the industry’s big complaints about the BI rule has been that it seeks to govern the use of the “advisor” title. Well, until now it seems that everyone had missed a key loophole in the rule. When the SEC drafted it, it allowed for dually-registered advisors/B-Ds to call themselves advisors even when they are carrying on brokerage business. 61% of registered reps work at dually-registered firms, meaning this aspect of the rule is mostly a moot point for the majority of advisors. According to Michael Kitces, famed advisor and wealth management commentator, “The rule literally doesn’t apply to most advisers”.

FINSUM: This is one of those bombshell realizations that seems to happen when a new rule is 1,000+ pages long—you miss things.