Is Financial Advisors in compliance with the SEC’s new Reg BI rule?

The SEC’s Regulation Best Interest (“Reg BI“) is a new rule focused on ensuring that financial advisors act in their clients’ best interest

The rule requires financial advisers to disclose their fees, conflicts of interest, and other important information to clients. It also imposes a “fiduciary duty” on advisers, which means that they must put their clients’ interests first. Many people wonder whether choices that financial advisors make are in their best interest. Until now, most people could claim to be a financial advisor – even brokers who didn’t operate as fiduciaries. Regulation Best Interest is helping to fix those issues.

What Does Regulation Best Interest Mean for Investors?

The main goal of Regulation Best Interest is to protect investors by requiring financial advisers to disclose their fees, conflicts of interest, and other important information to clients. The rule also imposes a “fiduciary duty” on advisers, which means that they must put their clients’ interests first.

In the past, there was no uniform standard for what constituted acting in a client’s best interests. This led to advisers promoting products that were not in the client’s best interests but generated higher commissions for the adviser. With the new regulation in place, advisers must now consider only what is best for the client, without regard for their own financial interests.

 

What Does Regulation Best Interest Mean for Financial Advisors?

The implementation of Regulation Best Interest has created a level playing field for all financial advisors, regardless of whether they are working as fiduciaries or not. All advisers must now disclose their fees, conflicts of interest, and other important information to clients. They must also put their clients’ interests first when making recommendations.

 

The fiduciary duty imposed by Regulation Best Interest applies to recommendations made about securities transactions and investment strategies.

Regulation Best Interest – New Rule for Financial Advisors

If you have ever wondered whether the choices that financial advisors make are in their best interest, you are not alone.

What is Regulation Best Interest?

In short, the Regulation Best Interest (Reg BI) is a new rule that imposes a “best interest” standard on broker-dealers when making recommendations to retail customers. This means that broker-dealers must now act in the best interest of their customers, rather than in their own best interest. The goal of this new rule is to protect investors from harmful conflicts of interest.

How does Reg BI address conflicts of interest?

There are three key provisions in the Reg BI rule that address conflicts of interest: Source

1:  the Disclosure Provision, which requires broker-dealers to provide customers with important information about themselves, their relationships with other firms, and the fees they charge.

2:  the Care Provision, which requires broker-dealers to exercise reasonable diligence, care, skill, and prudence when making recommendations to customers; and

3:  the Conflict-of-Interest Provision, which prohibits broker-dealers from engaging in certain practices that create asymmetrical incentives or expose investors to unnecessary risks.

The SEC has also released interpretive guidance on each of these provisions.

Source: 

Understanding Fiduciaries

You may have heard the term fiduciary before, but what does it actually mean? A fiduciary is a financial advisor who is legally bound to act in the best interest of their clients. This means that they are required by law to always manage assets in a way that benefits their clients’ best interest.

Fiduciaries can include lawyers, real estate agents, and other professionals who have the responsibility of managing assets for their clients. One of the important responsibilities of a fiduciary is that they must always put their clients’ interests first before their own

Why Should I Use a Fiduciary?

There are reasons why working with a fiduciary financial advisor can be beneficial. . First, fiduciaries are required by law to act in your best interest’ This means that they should always put your interests ahead of their own. Another reason to use a fiduciary is that they are bound by confidentiality laws. This means that they cannot share your confidential information with anyone without your consent.

What Are the Risks of Not Using a Fiduciary?

There could possibly be risks associated with not using a fiduciary financial advisor.’ First you may not be getting the best advice possible if your advisor is not legally bound to act in your best interest. Additionally, you may be at risk of having your confidential information shared without your consent if your advisor is not bound by confidentiality laws. Lastly, you may not be adequately protected from fraud or other financial crimes if your advisor is not regulated by the Securities Exchange Commission.

The SEC’s new Regulation Best Interest rule seeks to address many of the concerns that have been raised about the actions of financial advisors in the past. By requiring disclosure of important information and prohibiting certain unethical practices, the SEC hopes to protect investors from undue harm. While time will tell whether this rule is successful in achieving its goals, it is clear that the SEC is taking steps to protect investors’ interests.

Regulation Best Interest is a new rule focused on protecting investors from financial advisors who do not act in their best interests. The rule requires financial advisers to disclose their fees, conflicts of interest, and other important information to clients. It also imposes a “fiduciary duty” on advisers, which means that they must put their clients’ interests first. This is a positive development for investors, as it should help them make more informed decisions about where to invest their money.

Working with a fiduciary financial advisor may prove beneficial given the fact that they are legally bound to act in your best interest. Additionally, fiduciaries are bound by confidentiality laws and are regulated by the SEC, which provides additional protection for you as a client. If you’re looking for the best possible with guidance for your finances, working with a fiduciary could be the best option.

Interested in working with a Full Service Fiduciary Financial Advisor?  Start the Conversation MannaWealthManagment.com 

Disclaimer  The information and opinions expressed herein have been obtained from sources believed to be reliable but are not guaranteed for accuracy or completeness; are for information/educational purposes only; do not constitute a solicitation or recommendation for the purchase or sale of any security; are not unbiased/impartial; subject to change; may be from third parties. Opinions expressed are those of the Author and do not necessarily reflect those of B. Riley Wealth Management or its affiliates. Investment factors are not fully addressed herein. For important disclosure information, please visit www.brileywealth.com/legal-disclosures.