News and Commentary

Best Interest Rule Falls Short of Protecting Investors Best Interests by Todd A. Moll, CFP, CFA

The SEC recently adopted a new Regulation Best Interest (Reg BI) standard code of conduct for stockbrokers and broker-dealers to follow when providing consumers with financial advice and investment recommendations. Unfortunately, the new rules do not go far enough to legally and morally bind brokers and their firms to the more rigorous fiduciary standard required of financial advisors, registered investment advisors (RIAs) and CERTIFIED FINANCIAL PLANNER™ professionals. As a result, consumers must do their homework and ask the right questions to ensure that the advice they receive is, in fact, in their best interests and not influenced by the potential financial gains that their brokers may enjoy.

Know Who Is Providing Advice

In the world of financial services and investing, there are many types of professionals who consumers may turn to for guidance, including brokers and financial advisors. Contrary to popular belief, brokers are not the same as financial advisors, nor are they regulated by the same set of rules. However, clarifying the difference between each type of professional is complicated by the fact that both consumers and professionals themselves use these terms interchangeably.

For example, only investment advisors and financial advisors are bound by a fiduciary standard of care. Reg BI defines these professionals as those who “provide ongoing, regular advice and services in the context of broad investment portfolio management, and are compensated based on the value of assets under management (“AUM”), a fixed fee or other arrangement (“fee-based” compensation or model).” Conversely, brokers, broker-dealers and insurance agents, who may refer to themselves as financial advisors or wealth managers, provide “transaction-specific recommendations and receive compensation on a transaction-by-transaction basis (such as commissions)” are merely required to act in their customers’ best interests at the time they make recommendations. While this calls for brokers to “mitigate” conflicts of interest, it does not prevent them from recommending products in which they can reap financial gains.

 Ask The Right Questions

The best way to seek out and ensure that the financial professionals with whom you choose to work hold themselves to the highest standard and put your best interest before their own is to ask questions and always request written confirmation.

Reg BI is a step up from the current suitability standard that requires brokers to make recommendations that are “appropriate” to investors’ unique goals and risks, but it does not rise to the fiduciary standard’s higher level of investor protections. In response, some states are taking matters into their own hands and introducing legislation requiring all financial professionals within their borders to adapt the fiduciary standard and always put the best interest of their clients ahead of their own, regardless of their titles or the types of clients they serve. In the meantime, brokers and advisors will continue to be governed by two different standards, causing ongoing confusion for consumers will who bear the burden of trying to distinguish between the two.

About the author: Todd A. Moll, CFP®, CFA, is a director and chief investment officer with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. He can be reached at the firm’s Ft. Lauderdale, Fla., office at (954) 712-8888 or via email at


Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Todd A. Moll is a registered representative of and offers securities through Raymond James Financial Services, Inc., Members FINRA/SIPC.


Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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