While most advisor firms and broker-dealers are happy to let their compliance pros figure out how to implement Regulation Best Interest when it goes into effect next June, the CFA Institute is busy trying to figure out how to protect investors from what it says are the still widespread conflict of interest costs the rule obscures.

The new conduct and advice rules are supposed to make the differences between brokers and RIAs more transparent, “but I think the SEC missed the mark” particularly in the area of how brokers are compensated and may be paid to recommend certain products,  said Kurt Schacht, Managing Director, Standards and Advocacy at CFA Institute, which has minted 160,000 CFA professionals globally.

To combat that, Schacht said the CFA Institute is working with a number of other associations and trade groups to develop tools investors “can use when they walk into a broker’s office.

“We are working in tandem with a number of groups to develop tools to help investors understand what the conflicts are and how to ask about them and the things that they should get answers about when they have this type of financial relationship,” added Schacht, who said it was too early in the process to name the CFA Institute’s coalition partners yet.

Consumers trying to figure out who is paying their broker--and why--are left without a script they can use to detect conflicts, despite the SEC’s new disclosures, he maintained.

It isn’t enough to simply ask a broker: ‘How much is this going to cost me? He or she will say  “standard fees, a slight commission for trades” which is only part of what investors should consider, Schacht argued.

“No one tells investors to ask brokers, ‘are you getting paid by fund sponsors?’ This is the type of thing that costs investors in terms of conflict costs,” Schacht said.

It is true that it may be one of the brokerage industry’s best kept secrets that some of the worst funds pay the most to be on broker-dealers’ coveted sales platforms, simply because no one would sell or buy the products otherwise, either because of inferior performance, higher fees or both, fiduciary advocates said.

The rulemaking “was never an exercise to get rid of brokerage or sales relationships, but you have to be clear about the two models in a way that the customer understands it. That was the SEC’s sole objective and we think they failed,” added Schacht, who has led the institute’s advocacy for 15 years.

“I think this group of us is still running through what the options are and what would make the most sense in terms of literacy add-ons that consumers will pay the most attention to,” Schacht said. “We’ll do our own interpretation of what Reg BI is and develop the questions investors should ask. If they’re not satisfied with the answer, we will advise them to shop around.

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