Death by a thousand cuts sounds painful. But it’s the way John Anderson, a managing director at Independent Advisor Solutions by SEI, sees the road ahead for independent advisors as regulators continue to nudge them toward a full fiduciary role over the next 10 years.

The idea is “we’re not going to see one huge change. We’re going to a see a lot of little changes to get us to that pure fiduciary level down the road,” said Anderson, SEI’s managing director for practice management solutions for independent advisors.

“Unless you’re proactive now, you’ll find yourself in a fiduciary world and you won’t be ready,” said Anderson, who authored a new white paper by the same name: “Death By 1,000 Cuts On The Road From Suitability To Fiduciary.” The report details the key takeaways from Regulation Best Interest, which the paper says is pushing broker-dealers and the investment advisors associated with them toward a single, professional standard of conduct.

The key for independent advisors is to understand that Reg BI “is not just another disclosure” but is part of advisors’ evolution, which will force all firms to clearly articulate their value proposition, not only to regulators but to consumers.

Advisors should begin now to identify and eliminate conflicts of interest and find their value proposition—not only for regulatory purposes but because the industry and clients will escalate competitive demands on firms over the next decade, Anderson said in an interview with Financial Advisor.

“The SEC said that it won’t be playing gotcha over the next year as they provide advisors with guidance about implementing Reg BI,” he said. “A year from now, that promise of no gotcha goes away.

“I have the blessing or curse of being in this business for 30 years. Every time there is a new regulation it eventually zeroes in on how advisors are paid. If you have any business where you’re not being paid 100% by the consumer, it will begin to raise red flags. I think Form CRS is a good start to draw attention to that.”

He’s referring to customer relationship summaries (Form CRS for short)—the linchpin of Reg BI that requires all advisors to provide retail clients with a two- to four-page description of services, conflicts and compensation methods they use. Brokers and advisors who don’t provide ongoing monitoring on client accounts for the commissions or fees they’re charging will need to disclose that clearly for the first time—so that investors understand they aren’t getting account management, just a one-off product transaction.

Anderson said he is telling the 7,600 independent advisors who work with SEI: “Get in front of this. Lean into it. Get your house in order. Look at the potential conflicts you have. Don’t wait for your B-D or your compliance officer to take care of it.”

For some advisors that will mean a continued push to transition their legacy fund accounts to fee-based accounts. “Two-thirds of advisors are fee-based, but there is a lot of legacy business still sitting out there. What may have been a $50,000 fund sale 10 years ago may now be $150,000 sitting in A shares [which charge a front-load commission and trailing 12b-1 fees],” he said.

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