Voices: RIAs hold the winning hand in a Reg BI world
August 13, 2019 by Knut Rostad
In his article published in July in Financial Planning, Michael Kitces made two assertions concerning the SEC’s Regulation Best Interest: One, it did “materially lift” the broker-dealer standard; and two, RIAs will have trouble “differentiating themselves in a world where broker-dealers can legitimately state they, too, have a best interest standard.”
On the first point, Kitces is just plain wrong. On the second point, though narrowly, technically correct, in practical, real-world terms, he is also very wrong. These are central points that merit a discussion.
Make no mistake: Reg BI is the dawn of a new era for independent, fee-only RIAs. Advertising campaigns funded by deep corporate pockets will claim that brokers-dealers now offer a “new and improved” standard that is higher than the RIA standard. BDs are already sending this message.
But the reality is that Reg BI does not gut fiduciary advice as a differentiator for independent, fee-only RIAs. In fact, the opposite is true. Independent, fee-only RIAs’ best differentiator is what they do as fiduciaries that brokers can’t — It’s showing this difference is the challenge.
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