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To Ensure Advice Industry’s Future, FAs Must Empower Investors

August 9, 2018

The SEC has made a commendable effort to ensure a best-interest standard that works for investors and financial advisors — but advisors will need to change the culture of their firms if they want the industry to continue growing, Tony Chereso asserts on ThinkAdvisor.

The SEC’s comment period for Regulation Best Interest ended Tuesday, and it’s a good time to assess why the concept of a best interest standard is something the financial services industry has grappled with for close to a decade now, according to Chereso, president and CEO of the Institute for Portfolio Alternatives.

His trade association supports the SEC’s proposal, but Chereso suggests that the success of any regulatory initiative requires the advice industry to establish a relationship of trust with investors.

Public policies are impersonal by nature and thus cannot truly effect that relationship, he writes.

According to Chereso, broker-dealers and financial advisors already consider it one of their duties to educate investors on the investment choices available to them.

But he suggests taking that education further and helping teach clients about the principles of financial planning itself. That’s because the evolution of financial advice strengthens the need for a customer-centric model of the industry that emphasizes trust and value, according to Chereso.

“Culture, not regulatory policy, is ultimately the best prescription,” he writes.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.