About 30 investors told SEC Chairman Jay Clayton that while the SEC’s best-interest customer disclosures are needed by investors as decide which type of investment professional to hire, the agency's proposed document just doesn’t work.

The investors, many of them retirees, said at the agency’s seventh investor roundtable on Thursday that they had difficulty understanding the "Regulation Best-Interest" proposal and the customer relationship summary (CRS) form that goes with it.

The form, meant to educate investors about the difference between brokers and advisors, doesn't provide tools to help investors educate or protect themselves, the investors said.

The group of investors delivered the message not only to Clayton, but to three SEC commissioners and a panel of high-ranking agency managers at the event in Baltimore.

One investor told the crowd he had retired from Johns Hopkins University last year and had to take required minimum distributions from his retirement plan, which prompted him to search for a sales professional. “I had to decide about all the money that was coming in and I realized there are two different levels of investment professionals,” the new retiree said.

“Why couldn’t they all have investors’ best interests at heart?" the investor continued. "A fiduciary standard? That’s what everyone assumes anyway. I was quite surprised that didn’t happen. I just want to know I have the best person available."

This is the seventh SEC investor roundtable where investor confusion was the predominant message consumers delivered to the SEC.

That feedback comes on the heels of expert testing undertaken by a growing number of professional and consumer groups, including the AARP and CFP Board of Standards, which found that the CRS doesn’t work to inform or protect investors, and in fact may give them a false sense of security that brokers operating in their “best interest” are required to make them money.

“We’re doing our own testing,” Clayton told Financial Advisor magazine last night.

That has been a point of contention for advisor and consumer groups, since the SEC has made no expert test results available before the comment period on the proposals closed. Thousands of comments have flooded the SEC on the controversial proposals, which for the first time are supposed to explain to investors the differences between working with a broker who has a suitability or best-interest standard of care and advisors who have a legal fiduciary duty to put client interests first.

“We have work to do,” Clayton added, when asked when the proposal might be finalized. “Not next month or the month after that.”

“What’s sitting out there is a proposal, but it can be improved,” Clayton told investors. “It’s clear to us that the standard of conduct as it applies to broker-dealers is not where a reasonable investor expects it to be. When people deal with investment professionals, we believe that what they want to know that person is not taking advantage of them. You want to know that the law does not allow them to take advantage of you. They can’t put their interests in front of yours. I don’t think anyone up here believes the standard is where it needs to be."

“Second, when you go and meet with an investment professional and you have a 403(b) or 401(k) and you’ll be responsible for investing, when you go to that person they need to explain who they are, what their obligations are to you. I don’t feel that conversation is required [in the proposals] to take place in as clear and candid manner as it should,” Clayton said.

Clayton kicked off the roundtable—the first that reporters were allowed to attend—asking investors if they had any good or bad stories regarding their investment professionals that they’d like to share.

Several investors shared tales of persuasive salespeople who had met with them or their older parents to try to convince them to roll over their entire 403(b), 401(k) or federal employee thrift plan into variable annuities or, in one investor’s case, a fixed annuity.

SEC staffers said they are working on a customer relationship summary for variable annuities to educate investors about what their sales professional is selling and charging. However, staff admitted they have no authority over fixed annuities, which are regulated by state insurance commissioners, who have yet to finalize a national best-interest standard or customer disclosure form for insurance agents selling fixed annuities.

One investor suggested that when it comes to helping investors intelligently sort through broker and advisor fees, the SEC should follow the lead of the food industry which discloses calories for each and every product “so I can compare professional to professional. Some people are not comfortable asking, ‘How much do you make?’ But if they have a form that everyone gets that says, ‘Here are my fees,’ I can take that with me and compare. It changes the dynamic."

“I’ve been suggesting that,” SEC Commissioner Kara Stein said.

Clayton appears more circumspect about fee disclosure. “There are so many different kinds of products and charges, that’s hard to capture, but my objective is to get there over time,” added Clayton, who cited the benefits to investors from stepped-up mutual fund fee disclosures.

“We all agree with you and the benefits of that in the mutual fund industry that we’ve already had in terms of driving costs down in terms of competition. I can’t tell you how much money that actually puts back into clients’ pockets,” Clayton added.

He also said he is interested in using the proposals to ban high-pressure sales contests at broker-dealers, which can drive aggressive sales that are decidedly not in investors’ best interests.

If a broker is calling you as you’re rolling over your 401(k) and telling you to invest in a certain product by September 30 because they get a big bonus, “I don’t think you can have that compensation structure and not say you’re putting your own interests above investors,” Clayton added.