"When a consumer hires a financial planner, they expect that the advice they receive will be in their best interests at all times, which is the very essence of a fiduciary rule and the definition of 'advice' itself," Moore said in a statement. "By allowing brokers to hold out as financial planners and provide financial planning advice up front, and then switch to non-advisory services selling brokerage products during the implementation phase, the SEC amplifies the very consumer confusion they claimed they were seeking to fix with Regulation Best Interest."
Kitces added, "In the end, there is a place for both the sale of brokerage products and services, and financial planning and other investment advice, but reducing consumer confusion requires a clear separation between the two."
XYPN is asserting in its lawsuit that Reg BI allows brokers to provide comprehensive financial planning services without having to register as investment advisors and abide by the requisite fiduciary requirements.
XYPN alleges that the SEC exceeded its authority by reinterpreting the advisor registration requirements under the Advisers Act and the 'solely incidental' exemption for broker-dealers to permit dual-registrants to use advisor-like titles. This, according to the lawsuit, allows brokers to portray themselves as being in the business of providing financial planning advice while actually selling non-advisory brokerage services and products.
“The plaintiffs seek a declaration that the 'best interest' rule exceeds the SEC’s statutory authority and is arbitrary, capricious, or otherwise not in accordance with law," the lawsuit states.
Kitces estimated the lawsuit will cost about $60,000 in legal fees, but added that XYPN's bill could spike to as high as $125,000 depending on appeals.