Similarly, while the SEC’s advice rule proposes to reduce consumer confusion by limiting the use of the “financial advisor” term by standalone broker-dealers and their registered representatives, the agency continues to allow hybrid advisors to use the label “knowing full well that at least a portion of the advisor’s services will not be made in his/her capacity as an advisor but as a salesperson,” Kitces argued.
“In other words, advisors are explicitly being granted permission to market their services as “advice” and implement that advice without being subject to the appropriate standard for advice and without any requirement to explain to the consumer when the advice relationship ended,” he said.
The Consumer Federation of America found in a 2017 review of the websites of 25 leading broker-dealers that all used titles that identified them as advisors or a similar term.
“Most consumers simply cannot comprehend how a firm can state that is it offering a trusted advice relationship that by definition would be a fiduciary relationship of trust and confidence…and then not be subject to a fiduciary standard for that fiduciary relationship,” Kitces said.
Interested parties have until August 7 to comment on the SEC’s best interest, advice and customer relationship summary proposals.