SEC's Decision Hinders the Transformation of Financial Advice

Benjamin Haas |

I saw very little news coverage this week on the Securities and Exchange Commission (SEC) approving a variety of changes on how investment professionals will be regulated. Instead, I saw more news about China trade, the potential for Federal Reserve action and other bits of economic data that are also important issues, but not directly within our control. The media missed reporting on a newsworthy decision by the SEC that impacts how you, the investor, are protected from what has been a vague couple of years since the Department of Labor released a ruling that called for a “Fiduciary Standard” of action for all financial advisors and those perceived to be advisors. The SEC has left the door open for investors to receive conflicted advice from trusted professionals by approving a package of regulation that was essentially started years ago called “Best Interest”. “Best Interest” fails to include the Department of Labor’s (DOL) “Fiduciary Standard” that I feel that you deserve. The DOL Fiduciary standard was intended to manage compensation conflicts of interest and regulate the fundamental duty of loyalty to act in the client’s best interest.

Here’s what SEC Commissioner Robert J. Jackson, Jr. wrote earlier this week regarding the decision:

I believe that the SEC's most crucial task is to protect investors... Since I've been on the Commission, I have fought to do just that. So my hope was that the rules we announced today would significantly raise the standard for investment advice in this country. I hoped to join my colleagues in announcing that the Nation's investor protection agency has left no doubt that, in America, investors come first.

Sadly, I cannot say that. Rather than requiring Wall Street to put investors first, today's rules retain a muddled standard that exposes millions of Americans to the costs of conflicted advice. Even worse, contrary to what Americans have heard for a generation, the Commission today concludes that investment advisers are not true fiduciaries. Today's actions fail to arm Americans with the tools they need to survive the Nation's retirement crisis. Accordingly, I respectfully dissent.

I should also note that Commissioner Jackson’s prepared remarks also suggested that “investors should seek out true fiduciary advice from financial professionals who have chosen to hold themselves to a higher standard.” In my opinion, he’s right. I have been stating for years that investors should seek out a Certified Financial Planner® professional who IS held to the fiduciary standard and a code of ethics, even if the SEC will not hold them to that standard.

What’s the real take-away for you? That it’s your responsibility to know who you’re talking to, who is giving you advice, how they are compensated and whether they are able to follow the “Best Interest” standard or whether they are held to the “Fiduciary Standard” that actually requires them to act in your best interest along with duty of care. With all due respect to the advisors out there who are not held to the Fiduciary Standard but put their clients first anyway, I think investors deserve to know that if someone is giving them advice on some of the most important financial decisions in their lives, that they are doing so with the client’s best interest in mind, and not their own. The SEC failed to ensure that this week.


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