Displaying items by tag: fiduciary rule

(Washington)

After about a thousand steps, the years-long saga of the DOL fiduciary rule is finally over. As of this week, the DOL missed its final deadline to apply for an appeal of its fifth circuit court loss. The DOL had until Wednesday to file for a Supreme Court appeal of the ruling, which vacated the rule back in March. The missed deadline is no surprise, as the Trump-era DOL has completely backtracked from enforcing the rule.

FINSUM: This seems to be the final nail in the coffin. Now it is time to worry about the SEC’s best interest rule, especially with regard to titles.

(Washington)

Well, it was inevitable. The industry has officially started its major fight against the new SEC rule which seeks to stop brokers from using the title of “advisor” (or “adviser”). The National Association of Insurance and Financial Advisors (NAIFA) is on a winning streak, having been part of the group to take down the DOL’s fiduciary rule. Now it is turning its focus to the SEC title rule. According to NAIFA “We are still analyzing the almost 1,000 pages, and we’ll certainly comment on it, but one area where we have an issue already is the limit on who can use the term ‘advisor”.

FINSUM: It is critical to mention a couple of things here. One, this group, which has been very successful in taking down regulation, is an association of mostly brokers, not fiduciaries, so they have a keen interest in solving this situation. Secondly, the word “advisor” is part of their own name, so the new rule cuts to the heart of their very existence. We have a feeling this component of the SEC rule might prompt as much backlash as the DOL rule did.

(Washington)

There has been a great deal of industry feedback on the SEC’s best interest rule already and the comment period has only just begun. One point of contention among many is that the SEC proposal did not define the term “best interest”, leaving it vague and wide open to interpretation. However, that was likely the point, and the SEC may be very clever in doing so. According to Charles Schwab, “Once you define something, then it becomes easier to figure out how not to be engaged in that definition”.

FINSUM: The SEC left the definition of best interest out of the proposal because it wants to make it harder for those in the industry to side-step the regulation. Smart play.

(New York)

Advisors (or advisers) look out, your titles are poised to be taken away by the SEC. While much of the focus on the new SEC best interest rule has understandably been centered around its pseudo-fiduciary components, there is actually a major fight brewing over the SEC’s new rules which restrict the use of certain titles. In particular, it wants to bar brokers from using the word “advisor” and potentially “financial planner” as well. The idea is to only associate the word “advisor” with a fiduciary to make it clearer to consumers. Industry interest groups are already railing against the proposal.

FINSUM: We find this a complicated issue. We understand the fiduciary motivation here, but advisors have been using that title for a long time and, for better or worse, are known that way by the public. Further, a fee structure does not, in our view, change whether someone is an advisor (in the general sense of the word).

(Washington)

Advisors all over the country are wondering when the SEC rule might be implemented. The DOL’s fiduciary rule took ages to be a reality (and never quite made it), but the SEC rule seems like it will be faster. But how fast? Realistically, probably one year from now, according to one industry expert. BNY Mellon Pershing urges advisors to stay engaged and not catch “fiduciary rule fatigue”. “We still have an opportunity to shape the fiduciary landscape … It's really important that we don't grow weary of the standard of care issue, because we have an opportunity to take the lead”.

FINSUM: A year sounds reasonable. The rule is only in its first iteration now, and we suspect there will be significant changes.