Barbara Roper isn’t happy with certain members of Congress.
“Had to laugh when House Republicans used today’s hearing on Reg BI to criticize the DOL’[s] economic analysis,” the director of investor protection with Consumer Federation of America sarcastically tweeted after observing testimony Thursday about the SEC’s Reg BI. “Comparing it to the SEC’s economic analysis is like comparing a Ph.D. dissertation to a Dick and Jane reader.”
Roper and fellow fiduciary proponents gathered in Washington before the House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets to vent their views and largely decry the death of the Department of Labor’s Conflict of Interest Rule, while slamming the SEC’s Regulation Best Interest as insufficiently strict.
Rep. Carolyn Maloney, D-NY, took particular issue, noting, “The SEC’s proposed Reg BI rule won’t actually protect investors, in fact – it continues to put investors at risk based on their brokers’ own personal financial interests. That’s why I’m pressing the SEC to step up to the plate and protect investors.”
CFP Board
And the CFP Board’s Susan MacMichael John agreed that Reg BI, while “well-meaning,” doesn’t go far enough.
“While we appreciate the opportunity the rule proposals represent, our concern is that they offer the appearance, but not the reality, of increased investor protection,” John, said in her testimony. “However, if the proposed rules are strengthened, we believe the Commission may realize its goal of increasing investor protection.”
In contrast to the SEC regulation, John said CFP Board’s new Code of Ethics and Standards of Conduct that become effective October 1 provides clear and unambiguous protections requiring all CFP professionals to be held to a fiduciary standard when providing Financial Advice.
“The new Standards provide clarity for the public by extending the application of the fiduciary duty from financial planning services to all Financial Advice,” John testified. “The Standards are responsive to today’s complex financial marketplace, where consumers seeking investment advice find it virtually impossible to distinguish a salesperson from an advisor.”
The Standards, which must be followed by those who voluntarily hold the CFP certification, have significant differences with Regulation BI in three unique ways, John said:
- Best Interest. CFP Board’s Standards unambiguously define “best interest” as “fiduciary,” including both a duty of care and a duty of loyalty. Under Reg BI, “best interest” is not defined.
- Duty of Loyalty. Reg BI does not contain a distinct, well-defined, stand-alone duty of loyalty, whereas the duty of loyalty is prominently featured in the Standards.
- Conflicts of Interest. The Standards contain a straight-forward, effective solution to deal with conflicts of interest, regardless of how they originate. Reg BI distinguishes between different types of conflicts and has disparate ways of handling them.
“Many smart, educated, accomplished individuals fail to do basic due diligence to check out the financial advisor they choose to work with. And, they all trust their financial advisor to work in their best interest,” John concluded. “The client, it seems, trusts and is loyal to the advisor, no matter what.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
