Rostad called it shocking that “the term fiduciary, the single [biggest] differentiator between types of firms, has been eliminated from forms that are supposed to highlight material facts. Instead, we see form CRS that highlight[s] similarities and product fee schedules.”
Bill Prewitt, founder and chief compliance officer of wealth management firm Charleston Financial, said at the press conference he was not surprised advisor disclosures are light on fiduciary descriptions. “In preparing our form, I heeded advice from experts to downplay any mention of fiduciary,” said Prewitt, who added the firms’ advisors are seeing more investors who ask if they’re fiduciaries than ever before, mainly because of the job the media has done educating consumers, Prewitt added.
Scott Mackillop, CEO of First Ascent, said at the press conference that the confusion playing out in relationship summaries is a result “of the past 20 to 25 years of the SEC trying to figure out what to do with the brokerage industry as it moved more and more into the advice industry.”
As a result, “the SEC hasn’t been very successful in articulating what the standards are or communicating them to the public…so the investing public is not able to distinguish between groups operating under different standards,” he said.
Added Mackillop, “I wish I had more faith that the SEC was going to go back and help.”
To help advisors and the SEC clear up confusion, Rostad released sample language he said “highlights material facts that expose differences” between RIAs and BDs.
“As an investment advisor, we always act as a fiduciary to you and put your interests first, while, by law, a broker-dealer is not required to put your interests first,” one example states.
“Fiduciary applies, by law, to ‘the entire relationship between an adviser and its client,’ while the broker-dealer standard only applies “when the recommendation is made,” the institute said.