August 2, 2018
Dear SEC:
I am writing to comment on the recent Regulation Best Interest proposal.
First, and most importantly, I believe this proposal would further confuse the general public about the differences between a broker who has to act in the clients best interest and an IAR who has a fiduciary duty. While I applaud the SEC for trying to raise the advice standards of brokers, the original intent of brokers was not to provide advice at all, but to simply sell a product.
Currently, clients are already confused by the difference between suitability vs fiduciary. Changing it to best interests vs fiduciary will make the problem even worse. On top of that, there appears to be no clear definition of best interests in the proposal. A more appropriate solution is to either leave brokers at a lower suitability standard while ensuring consumers are 100% clear that brokers are salespeople and not advisors, or to make all brokers and IARs subject to a fiduciary standard as the DOL rule suggested.
Consumers deserve to know if they are truly dealing with an advisor or simply a salesperson. This brings me to the next issue, the CRS disclosure. More disclosure is a nice idea in theory and from a legal defense standpoint, but I highly doubt it will do any good to protect/inform the general public. Even a shortened four-page disclosure is probably three pages too long. I suspect this would do very little to help consumers understand who they are dealing with when they meet with a broker or IAR.
I do support the SECs proposal to limit the use of financial advisor to IARs only. Brokers have long muddied the waters through marketing and fake titles to lead the public to believe they are advisors while maintaining in court that their advice is solely incidental to the product they were selling. Consumers deserve to know who is a real advisor and who is a salesperson. I would add that hybrid advisors who wear both hats as a broker and an IAR will continue to be able to use the term advisor and this may create confusion as well. I highly doubt a consumer will be able to differentiate between when the advisor is acting as an IAR and when they are acting as a broker.
I understand the SECs proposal to add continuing education for investment advisors, but this may be redundant as many advisors are CFP® professionals who are subject to 30 hours of continuing education every two years. I could get behind a plan that requires IARs who only have a Series 65 license to be subject to continuing education with an exemption for CFP® professionals.
Lastly, I do not support the proposal to add capital requirements to RIAs who hold assets at third party custodians. I believe a risk-based approach like the one Michael Kitces suggested in his comment letter would be appropriate if the SEC decided to do anything at all.
Thank you,
Steven Elwell, CFP®
Partner, Vice President
Level Financial Advisors