What happens when FINRA's President interviews the SEC's Chairman?

Summary:  Even now, there was a lot of talk about Reg BI and what it really means. They reiterated that Reg BI needs to focus on costs, conflicts, reasonable available alternatives, commission vs advisory, account (type) opening recommendation, product recommendations...and that's not all of it.

Last month, DDW attended the FINRA Conference in Washington DC. One session that caught our eye was when SEC Chairman Gary Gensier who was interviewed by FINRA President Robert Cook. Their conversation took many turns, but the most significant discussion circled around Reg Best Interest. Chair Gensier expressed his views that Reg BI is not a check-the-box exercise or suitability with a new wrapper, it is much more than that.
Reg BI needs to focus on costs, conflicts, reasonable available alternatives, commission vs advisory, account (type) opening recommendation, product recommendations, and more.

3 Key Takeaways: 

1. Documentation is key and needs to include everything stated above. (For example: costs, conflicts, RAAs, commission vs. advisory, account (type) opening recommendation, product recommendations, etc.) 

2. Technology should play an important role. It is really difficult to satisfy the reg without software to help the process. Manual efforts will certainly lead to errors, mistakes and missed steps.

3. The system cannot be rote or check-the-box. Be wary of systems that lead you down the same path all the time, or if advisors have already reverse engineered the system to get the answer they want.

Reg BI tools need to carefully balance automation, customization, and enabling the advisor to record their decisions and perspective on a client-by-client basis. We've worked with many firms to understand their Reg BI situation and inform their decision-making process. We've probably addressed the very issues you are addressing. If you think we can useful to your firm, we hope you will reach out to us. 

MORE INFORMATION:
For more information about the author or DDW's products and services, contact Mike Freeman

973.567.6600 | michael.freeman@duediligenceworks.com