As a result, investors are likely to be as confused as before – if not more so,” Barr said.
It will be critical for advisors and the IAA to point out these disparities and possible pitfalls and ensure that investors aren’t led astray, the executive said.
“We must continue to educate the public about the key differences between brokers and advisers and the services they provide.”
The language Barr laid out for advisors to use when educating the public and differentiating themselves is straightforward:
• Investment advisors are fiduciaries to their clients throughout their entire relationship, and with respect to all agreed-upon advisory services.
• Investment advisors provide ongoing advice over the long term (unless otherwise agreed to upon engagement, for instance an hourly engagement to tackle a single topic), which is very different than the transaction-by-transaction recommendations or product sales offered by brokers.
• Investment advisors’ business models and compensation structures typically align more closely with clients’ interests, while brokers and their reps’ financial structures are dependent on sales and commissions and therefore present more acute conflicts.
Investors increasingly recognize the value of fiduciary advice and have been gravitating toward investment advisors to help them meet their financial objectives, including investing for retirement, homeownership, or education. “That trend is not likely to change,” Barr said.
“We appreciate our members’ substantial feedback and engagement on these issues – both in the current rulemaking process and for the past two decades,” Barr concluded.
The IAA has established members webpage with resources for understanding and navigating the SEC’s new standards of conduct rules and their impact on advisors at https://www.investmentadviser.org/resources/new-conduct-rules-resources.