Some two-thirds of registered investment advisors believe the SEC’s best-interest proposals will either have a negative impact or won’t help, according to a new Fidelity survey.
Just 33 percent of respondents believed the Security and Exchange Commission's controversial proposals will have a positive impact, the survey of 391 advisors found.
The SEC’s best-interest proposals are ostensibly designed to elevate the sales regulation of brokers, alleviate costly conflicts of interest and improve consumers’ understanding about the differences between working with a broker as opposed to a registered investment advisor. Only the latter—registered investment advisors—are held to a fiduciary standard that requires they put their clients’ interests first at all times and gives clients the right to sue if their advisors breach that fiduciary duty. And only the latter have been allowed to charge for advice.
The proposals are controversial because for the first time they would greenlight brokers’ ability to offer and charge for advice and market themselves as acting in investors’ best interests.
Despite the competitive implications of the proposals, it is perhaps surprising that fewer advisors are aware of the SEC’s proposal than were aware of the DOL fiduciary rule, which was struck down by in a court ruling earlier this year. Maybe it is because the DOL rule was five years in the making, while the best-interest rules was proposed this past spring.
Some 85 percent of advisors were aware of the DOL rule, while 73 percent were aware of the SEC proposal, according to the Fidelity survey.
However, advisors ignore the SEC rule at their own peril.
“The industry is evolving, so advisory firms need to consider where they fit in this new landscape,” Fidelity warned.
While many advisors are no doubt afflicted by “fiduciary fatigue” and are waiting for their platform provider and compliance firm to tell them how it will impact their business, that can be a dangerous strategy, the company said. “There is still significant ambiguity in the proposals,” Fidelity said.
Some 40 percent of surveyed advisors who were aware of the SEC’s proposal did not plan on acting until there is further clarification, while 78 percent said they need some help assessing and evaluating the proposals.