Brokers No Longer Advisers | | AP Wealth Management


BY RYAN W. NEAL, Investment News | APR 23, 2018

Even though the Securities and Exchange Commission’s proposed advice rule could require them [brokers] to make changes in the way they do business, some brokers acknowledged that the regulation is needed to clear up investor confusion about the advice industry.

Among other things, the rule addresses the best interest standard, conflicts of interest and who can describe themselves as an adviser (or advisor).

Ron Carson, founder and CEO of the Carson Group, said the SEC’s proposal is a step in the right direction, but that it needs to go further and require everyone to act as a fiduciary.

“Unfortunately, a large majority of investors are under the impression that that is already the case, and are completely unaware that many of the financial professionals with whom they do business are under no obligation to prioritize their best interests,” Mr. Carson said in an email.

Jim Dowd, the founder and CEO of North Capital Private Securities, also wishes the SEC went further. He added that the SEC’s idea of preventing brokers and registered reps from calling themselves advisers could be the single biggest step toward improving the treatment of retail investors. Mr. Dowd said his firm keeps a clear delineation between its brokerage business and registered investment advisory business and said someone selling a product shouldn’t be allowed to convey that they are doing otherwise. “Anything that helps add some clarity and helps limit bad behavior on the part of the financial firms, it’s a good thing,” he said.

Doug Flynn, the cofounder of hybrid firm Flynn Zito Capital Management, agreed that preventing brokers from calling themselves advisers could help clear up investor confusion and improve perception of brokers.

“I’m on the record saying there’s nothing wrong with being a broker, and to stop confusion, stop people who are brokers from calling themselves advisers,” Mr. Flynn said, “Right now it’s just so blurred.”

Glenn Wiggle, managing partner of Peak Brokerage Services, believes the industry should be held to a uniform standard, and said it’s been difficult for independent broker dealers to navigate the various levels of suitability and best interest. The SEC, Mr. Wiggle said, is the right agency to provide that standard.

He also thinks the SEC’s proposal is an improvement on the Department of Labor’s fiduciary rule, which Mr. Wiggle said went “way over the top” when it came to conflicts of interest.

”Ultimately it was just way overbearing … an almost impossible standard to get to,” Mr. Wiggle said, noting how some firms have simply closed up or sold their brokerage businesses because the threat of a lawsuit just wasn’t worth the risk. “The DOL rule was really not well thought out. I welcome this replacement to it from the SEC.”

Mr. Wiggle doesn’t really mind a rule on who can describe themselves as an “adviser,” but doesn’t think it will do much in terms of providing clarity to investors. Between insurance agents and registered reps and dual registered brokers and RIAs, clients are confused enough to begin with, he said. Jeff Benjamin contributed reporting to this story.