RIAs manage investment portfolios for clients and typically make money by charging annual management fees. The “registered” part of RIA refers to the fact that they must register with the SEC or with state agencies.
Brokers register with the Financial Industry Regulatory Authority —a private industry group, not a government agency like the SEC. FINRAfor brokers, meaning they must have reasonable grounds to recommend a certain product of investment but they don’t always have to act in their customer’s best interest.
Regulation Best Interest also requires both RIAs and brokers to provide their clients with a new document that discloses key facts about a firm: The administration argued the rule was necessary because of the greater responsibility individual Americans were taking on for their own financial futures compared to past generations, when government or corporate pensions were the norm. The financial services and insurance industries argued the fiduciary rule would make it too expensive to work with smaller investors and could limit what types of investments were available.
Geoffrey Brown, CEO of the National Association of Personal Financial Advisors , is even more critical. Brown believes Regulation Best Interest’s disclosures are too subjective and potentially misleading. on grounds that the agency was required to impose a higher standard of fiduciary care on broker-dealers, but doesn’t. Some states are moving to implement stricter rules of their own.“Regulation Best Interest was the right approach for the SEC to take. It’s better than what a lot of alternatives, particularly what the DOL fiduciary rule would have been,” says Mark Quinn, director of Regulatory Affairs for Cetera, a large network of over 7,000 broker dealers.
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