As we head into the second half of 2020, you may notice a change in the way investment plans are presented to you by your financial advisor. The SEC implemented a new ruling called Regulation Best Interest (REG BI) that is aimed at providing better clarity and transparency when it comes to investments that your advisor recommends.

At the heart of the regulation, your broker must now act in the best interest of the investor, when it comes to recommending investment products and strategies, without placing the interests of the firm ahead of the customer.

Previously, if your advisor was not a “fiduciary obligated to act in the best interest of the client,” you may have felt that the way your broker charged for fees or selected investments was unclear. With REG BI in place, you should feel a higher level of trust and confidence in how your portfolio is being managed.

What is going to be different?

The first part of the REG BI fulfillment includes several obligation requirements set by the SEC in order to remain within compliance:

  1. Clients must be told why a broker recommends any given investment product, strategy, or account change.
  2. Brokers should have a reasonable basis to believe their recommendation is in the best interest of the customer.
  3. All conflicts of interest related to a broker’s recommendation must be disclosed to the client.
  4. Brokers are expected to create their own additional policies to fulfill compliance requirements.

In the second part, your advisor will provide you with a disclosure statement, Form CRS, that provides clarity regarding the broker/firm and has conversation starters to help you feel comfortable asking questions and getting answers. Information you will find on the form include:

  1. Relationship and Services
  2. Fees, Costs, Conflicts and Standards of Conduct
  3. Disciplinary History
  4. Additional Information

We realize this change may spur some questions and we are happy to address any concerns you may have, so please feel free to reach out to us.