What the SEC's new 'best interest' rule means for you

AP

Print Article

FILE - In this Nov. 20, 2018, file photo an American flag flies outside New York Stock Exchange. The SEC recently passed new regulations it says will ensure that brokers act in their clients' "best interest." (AP Photo/Mary Altaffer, File)

The SEC recently passed new regulations it says will ensure that brokers act in their clients' "best interest." But what does that mean for you?

THE RULE

Brokers and advisers must disclose information about fees, costs and potential conflicts of interest.

THE ISSUE

Consumer advocates have long argued for more rules to protect Americans seeking advice and other help investing their money. They say investors lose billions of dollars a year because of advice from brokers whose financial incentives are at odds with their clients' best interests.

THE PROFESSIONALS

The "best interest" rule, as it is known, changes things more for brokers than advisers.

Brokers sell stocks, bonds, mutual funds, annuities and other investments, which they may recommend to clients. They often receive commissions for selling specific products. Currently, they are only required to make suggestions based on what is "suitable" for their client, based on the client's age, goals, risk tolerance and other factors.

Under the new rules, brokers cannot put their own interests ahead of that of their clients. They will also not be allowed to use the term "adviser" as part of their name or title in dealing with retail investors.

Investment advisers, on the other hand, were already required to divulge their potential conflicts of interest and put their clients' interests above their own. The new rules don't prohibit conflicts of interest, they just require that advisers disclose them.

THE CRITICS

Critics, such as AARP and the Consumer Federation of America, say the new rule doesn't go far enough and muddies the waters for consumers with confusing paperwork. Critics also say the rule is not as strong as the fiduciary rule, a proposal that was opposed by President Donald Trump and defeated in federal court with the help of some in the financial industry.

THE TIMING

Firms have until June of 2020 to come into compliance with the rules.

Consumers should become more diligent about reading and understanding the paperwork they are given in the future, said Geoffrey Brown, CEO of the National Association of Personal Financial Advisors, which opposes the new regulations.

"There is a lot of confusion," Brown said. "The SEC missed a great opportunity to lessen consumer confusion about the duties of a financial professional."

Brown suspects there may be more clarification between now and 2020 as experts wade through the lengthy final rules. Some states may also take their own steps to protect consumers, Brown said.

In the meantime, Brown suggests finding an adviser affiliated with industry organizations like his own, or consider a certified financial planner who adheres to the fiduciary standard.

________

Follow Sarah Skidmore Sell on Twitter @sarahssell

Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org.

Print Article

Read More Stocks & Finance

Millennial Money: Credit score up? Build credit smarts, too

AP

July 16, 2019 at 8:49 am | Well done, America. Credit scores across the nation are going up. On the other hand, knowledge of how credit works is declining. Consumers' grasp of credit is the lowest it's been in eight ye...

Comments

Read More

Liz Weston: 3 steps to keep 'solo agers' happier and safer

AP

July 15, 2019 at 5:56 am | Retirement coach Sara Zeff Geber visited several Northern California assisted living facilities to interview "solo agers" people, either single or coupled, who don't have children to help them as ...

Comments

Read More

A glance at US mortgage rates: 30-year loan steady at 3.75%

AP

July 11, 2019 at 3:20 pm | U.S. long-term mortgage rates were little changed this week. The key 30-year, fixed-rate loan held steady at 3.75%. This weekLast weekYear ago30-year fixed3.753.754.5315-year fixed3.223.184.025-ye...

Comments

Read More

US long-term mortgage rates little changed, 30-year at 3.75%

AP

July 11, 2019 at 3:13 pm | WASHINGTON (AP) U.S. long-term mortgage rates were mostly unchanged this week amid signals from the Federal Reserve that it is preparing to cut interest rates soon. Mortgage buyer Freddie Mac s...

Comments

Read More

Contact Us

(406) 755-7000
727 East Idaho
Kalispell, MT 59901

©2019 Daily Inter Lake Terms of Use Privacy Policy
X
X