Ask The Hammer – What is Reg BI?
Jeffrey defines Reg BI, a new rule requiring that financial professional act in their client's best interests.
Key Takeaways
- Regulation BI requires financial professionals to act in your best interest, but it does NOT make everyone a fiduciary—there are still key differences between Reg BI obligations and true fiduciary status, so verify what legal obligations your advisor actually has
- Don't assume the title 'financial advisor' means anything specific; anyone can use it without certification, so ask directly what regulations your professional is subject to and whether they're a true fiduciary under all circumstances
- Understand what you're looking for before hiring: if you just need a specific insurance product, you may not need a fiduciary, but if you want comprehensive lifetime financial guidance, prioritize finding someone legally obligated to always act in your best interest
- Get referrals from friends and family who have actually worked with the professional—this is one of the best ways to vet advisors, yet money conversations remain taboo; push past this discomfort to get real feedback about their experience
Ask The Hammer - What is Reg BI? In this episode of Ask The Hammer, Jeffrey Levine defines Reg BI, a new rule requiring that financial professional act in their client's best interests and describes what the SEC's Reg BI means for investors.
In June of 2020, the Securities and Exchange Commission (SEC) voted to adopt a package of rulemakings and interpretations designed, according to a press release, "to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products."
Specifically, the SEC said these actions include new Regulation Best Interest, the new Form CRS Relationship Summary, and two separate interpretations under the Investment Advisers Act of 1940.
Individually and collectively, the SEC said these actions are "designed to enhance and clarify the standards of conduct applicable to broker-dealers and investment advisers, help retail investors better understand and compare the services offered and make an informed choice of the relationship best suited to their needs and circumstances, and foster greater consistency in the level of protections provided by each regime, particularly at the point in time that a recommendation is made."
"For the most part, it requires that professionals act in your best interest when dispensing advice," Levine said in this episode of Ask the Hammer. "However, what it doesn't do is just as important; it does not make everyone a fiduciary. There still are key differences between the rules that individuals are subject to under Reg BI and being a true fiduciary all of the time."
Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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