Wealth Management


Many advisors seem to be confused about the new SEC fiduciary rule proposal, and we can commiserate. While the rule is called a new fiduciary rule, by all accounts, it really is not. While it does compel additional disclosures to clients and efforts to minimize them, it does not try to eliminate conflicts entirely. It has no best interest contract, and no capacity for clients to sue advisors they are unhappy with. It also has no uniform standard for brokers and advisors and maintains the distinction.

FINSUM: This rule is very different than many were expecting. Perhaps its biggest impact will be in reforming and restricting who can use the word broker, which in our opinion does a great deal to make the market more transparent to clients.


The wealth management industry will likely find itself pleased this week, as many may sense victory in the long battle against the DOL’s fiduciary rule. The SEC has now released its own proposal for a new fiduciary rule, and the rule looks favorable. The new rule would place less onerous restrictions on brokers and advisors. It will not ban any single conflict of interest, but would place a responsibility to disclose certain conflicts of interest to clients and take steps to mitigate their effects. The rule does not contain a specific provision allowing clients to sue their brokers for misbehavior. The SEC would also disallow the use of blurred titles, such as “financial advisor”. The SEC approved the rule by a 4-1 vote and it will now have an official comment period.

FINSUM: The one dissenting vote blasted the rule as a continuation of the status quo. To be honest, the proposal sounds quite favorable to the industry, with many saying it is not really a fiduciary rule (it doesn’t seem to be), and we were not expecting such a mild outcome. We think Congress will likely come down hard on the SEC. This is far from a done deal.


Advisors need to prepare themselves for what could be a harsh reality. While the wealth management business collectively holds a great deal of hope that the SEC will come out with an enlightened rule that makes much more sense than its DOL predecessor, the reality is that the SEC rule is likely to be much more expansive, and potentially much more onerous. The new SEC rule seems poised to cover all types of accounts and all groups—RIAs, B-Ds, and “associated persons”, all under a broad umbrella.

FINSUM: While the industry definitely has a much higher faith in the SEC, there is certainly an element of the “devil you know” going on here. If the rule is much more expansive, it could lead to a higher regulatory burden and yet more disruption to the industry.

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