Broker-dealers may want to reevaluate the role of the traditional registered representative in light of the SEC’s Regulation Best Interest, according to a recent report.
For example, the SEC rule requires broker-dealers to eliminate, or disclose and mitigate, material conflicts of interest, which is a step above Finra’s suitability requirement, according to Morningstar’s report.
Additionally, Reg BI requires broker-dealers to provide new disclosures on conflicts of interest, services and fees; evaluate an investment product’s cost to determine how reasonable it is; evaluate products compared to available alternatives as far as performance, risk and cost; and more, all of which goes beyond Finra’s suitability requirements, Morningstar writes.
For those reasons, broker-dealers may want to rethink their representatives’ role “as an agent of client engagement and personalized value,” according to the report. To do so, broker-dealers can look at how their representatives could spend more time on goal and risk management, account aggregation, financial planning, generational planning, tax management and withdrawal strategies, Morningstar writes.
“This solution restructures the traditional representative role by integrating third-party investment selection, asset allocation and portfolio management. It can help reduce risk and free up time for attracting new clients and digging deeper with existing clients,” according to the report.
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