Brokers and advisors also need to consider costs and risks to investors, he said. “While it is true that they don’t always have to recommend the lowest-cost option, they must have a reasonable basis to believe a higher-cost recommendation nonetheless is in the investor’s best interests,” he said.
“Brokers and advisers have a critical role to play in all of this. ... Firms need to take investor protection and compliance obligations seriously, reining in or curing any conflicts and really delivering the best-interest advice that investors so need and deserve,” Gensler concluded.
With the explosion of robo-advisors, Lubin said that NASAA doesn’t share the view that it doesn’t matter if investment advice comes from person or algorithm.
Gensler said he also believes the SEC needs to be technology neutral, but not technology naïve.
Take for instance “separately managed accounts. The price has come down, and there’s lots of competition, which is good, but what’s behind the algorithms? Is someone steered one way or another because optimization is steering them based on the firm’s revenue,” Gensler asked.