This year, financial advisors saw some of the biggest changes in the evolution of their industry since the financial crisis. There hasn’t been a flurry of regulatory changes like this since the two-year period from 2007 to 2009. Those years saw the Financial Planning Association successfully challenge the Securities and Exchange Commission and its exemptions for broker-dealers. They also saw the introduction of fiduciary duties, in some circumstances, to the CFP Board’s rules and the passage of the Dodd-Frank Act.

I believe financial planning is a profession (in the noblest sense of that word), and so it’s appropriate that planners are held accountable to a bona fide fiduciary standard. I also believe that non-incidental investment advice is subject to the Investment Advisers Act of 1940, an idea upheld by the courts, which means those holding themselves out as “financial advisors” should be regulated solely under the auspices of that ’40 Act. They shouldn’t be able to switch hats, turning from advisors into salespeople, from fiduciaries into non-fiduciaries. It’s pretty simple. If you don’t want to be held to a fiduciary duty at all times, don’t hold out yourself out as an advisor or financial planner.

Four Changes To Watch

This year, the financial planning profession saw four significant or potentially significant events. One was the death of the Department of Labor’s fiduciary rule. Another was the unveiling of Regulation Best Interest from the SEC. The third development was that the CFP Board of Standards significantly raised the ethical bar for its certificate holders; the fourth was the reorganization of the chapter system of the Financial Planning Association.

In the years leading up to the release of the fiduciary rule by the DOL, I was hopeful that something meaningful and useful for the public would result. Alas, the public still lacks the ability to hold much of the financial services industry accountable to a bona fide fiduciary standard.

One potential significant positive that came from the whole affair with the DOL rule is that in order to kill it, its opponents had to argue—and essentially prove in court—that they are not actually trusted advisors. They have now made it explicit that they are only salespeople, and that they have only arm’s-length relationships with their clients. This tacit admission could become critical later.

Now the SEC has stepped into the fray. When I first heard that the Securities and Exchange Commission was going to take on the job of raising the standards for brokers, I was hopeful the agency might actually do its job and look out for the interests of the public above those of the financial services industry. With a title like “Regulation Best Interest,” maybe all the people holding out as “advisors” would be finally, actually subject to the Advisers Act all the time. After all, the most basic definition of a “fiduciary” is that it is someone acting in another’s best interest.

Sadly, shamefully, instead of enforcing existing law (exempting brokers from the Adviser Act only if the advice is “incidental,”) the SEC instead rebranded the “suitability” of certain products an advisor offers as the same thing as a best-interest standard. In other words, the agency used fiduciary language to describe a sales role. The rule would allow brokers to describe themselves like fiduciaries but not be held to a fiduciary standard.

The shepherd has given the wolf a sheep costume. I call this “Regulation BS” because of this horrid ruse.

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