How RIAs Feel About Sharing Their "Advisor" Status With Broker-Dealers
Source: FA-IQ, Jun. 28, 2018
RITA RAAGAS DE RAMOS, FA-IQ: The SEC'S proposed regulation best interest package bans broker-dealers from using the title adviser or advisor unless they are also dually registered. FA-IQ asked an elite list of Top 300 Financial Times Advisors if there is a need to clearly make this distinction, and if this ban goes far enough. Here is what they had to say.
STEVEN CHECK, PRESIDENT, CHECK CAPITAL MANAGEMENT: I think it's really a great idea. And I think it's a simple idea. I think that's what the general public frankly needs. They don't need a bunch of disclosure of what the difference between an advisor and a broker might be.
And frankly, using something like a term like advisor says a lot right there. And the industry will take care of itself, probably, in promoting what that term means versus what a broker does as a business.
ROBERT CASE, CEO, INGALLS & SNYDER: Well, let me start by saying that Ingalls & Snyder doesn't have a side to take in this debate. We are, as a duly registered firm, both a broker-dealer and an investment advisor. I think we would come out just fine no matter what the SEC does on that very specific question.
There has been probably 100 years of history of brokers being deemed to be giving investment advice when they make recommendations about securities. And I think to take the title advisor away from that activity is somewhat problematic. So I don't think that that specific element of the proposal is a great idea.
There are probably other ways to help retail investors understand the differences between what a broker dealer does and what an investment advisor does.
MICHAEL WEISSMAN, DIRECTOR, INVESTMENT ADVISORY AND PRINCIPAL, ASPIRIANT: I don't really have a big problem with brokers using the term advisors. The bigger issue for me is whether they are in fact acting in the best interest of clients and just the issue of acting as a fiduciary.
Myself, I grew up in a registered investment advisor world with Deloitte and Touche and now with Aspiriant. So I've always had that fiduciary standard. And additionally, I have certifications as certified financial planner, a CFP, a CIMA that's sponsored by Investments and Wealth [Institute]. And we have codes of ethics that go beyond some of the regulations that you're going to see. And obviously in those groups, they're not only registered investment advisors, they're brokers. So to me, it comes down to whether the advisors are acting in the best interest of the clients.
BRIAN VENDIG, PRESIDENT AND MANAGING EXECUTIVE, MJP WEALTH ADVISORS: I think with a lot of the conversation that's happened in the marketplace around the fiduciary rule and that whole conversation that happened from a regulatory view between the Department of Labor and the SEC, it seems like this passage of recommendation to make an appropriate clarification of title seems reasonable because the public is interested in understanding who is a fiduciary, what is in my best interest versus the people that I'm working with in trying to make sure that there is an alignment of thought.
I don't know, necessarily, if there has to be additional changes in title, because that might add complexity throughout the process. Another thought or idea can also just be that firms themselves do a better job in clarifying to their employees how they should be promoting themselves to their clients based on the financial metrics or obligations that they have in the different types of brokerage or advisory services that are being promoted.
ANSON BEARD, PRESIDENT, CARY STREET PARTNERS INVESTMENT ADVISORY: We do agree with the distinction. I think if you think about the term advisor and the connotation of what that term really means, an advisor should be held to or is held, really, to a fiduciary standard. You know, an advisor that has custody of a client's assets, that is working with that client to deploy the assets, they have a fiduciary standard. And I think that there should be a title that is associated with that.
I don't really have a strong opinion as to whether or not the SEC should go, or Finra should go farther than that. But we do agree that there is a distinction between being a transactional broker and being an advisor who is really a fiduciary on behalf of your client.