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Is Best Interest Really Best?

Much of the discussion surrounding the best interest rule has referenced the requirement that investment advisers are fiduciaries to their clients while brokers are not held to that fiduciary standard. Regulation Best Interest and the new customer relationship summary are intended to provide investors with a clear description of the duties and obligations of investment advisers, broker-dealers and dually registered persons and firms. Not surprisingly, this new approach is not meeting with universal approval and acclaim. In fact, Congress may take steps to change or remove the SEC’s new rule and this discussion will be moot.
However, returning to the SEC rule, the SEC interestingly has stated that investment advisers are no longer required to describe their duty to clients as fiduciary and must instead disclose that their duty is to serve the best interests of their clients! This obviously is not identical with what most registered investment advisers do – act as fiduciaries – and how they currently describe and market their services to clients. 
So what apparently happens is that the SEC effort to clarify the differences between different roles ends up potentially providing clients with less assurance respecting their investment adviser and no less confusion about how the roles of broker-dealer and investment adviser differ. In addition it instead appears to create confusion and require a great deal of time and energy for investment advisers to once again change all their documentation to meet this new requirement. Not sure how this serves anyone on the investment adviser side of the industry, whether adviser or client.
Not surprisingly, insurance sellers have no fiduciary or best interest obligation.  Maybe that should be a consideration when we are thinking about how to best serve and protect investors.


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