nVest Advisors was conceived and created to provide effective, low-cost, fully fiduciary financial planning and investment management for all of our clients, but especially for those clients who are largely overlooked by other RIA firms due to income or accumulated wealth limitations.
The middle-income American family and small business owner have traditionally been targeted by the retail financial services industry for expensive product sales rife with conflicts of interest, high (and often concealed commissions, poor sales training, and lax enforcement of ethical standards of conduct.
While we applaud the recent SEC vote to enact Regulation Best Interest (BI), which obligates the retail investment sales industry to disclose material conflicts of interest to their clients, we believe it falls far short of protecting consumers the way they need to be.
As just one example, Reg BI requires “informed consent” of conflicts, but once that information is conveyed to the client, the salesperson and their broker/dealer or insurance agency is now clear to still sell the product to the consumer, even if it’s not demonstrably in the client’s best interest. This makes the reg’s name an ironic misnomer, and the reg itself a toothless tiger.
It is also not lost on us that this regulation follows an unsuccessful attempt by the Department of Labor to enact a Fiduciary Rule for all retirement accounts in 2017 and 2018. This was met with virulent and stringent opposition by the same investment and insurance firms that today are being asked to disclose their conflicts of interest in meaningful, helpful ways to the retail investment/insurance marketplace.
Color us skeptical.
nVest Advisors has no problem whatsoever with requiring added transparency – far from it. But we know from many years of working with clients, particularly clients in the middle income market, that a legal disclosure document required by Reg BI will be most likely difficult to read and understand, as many other disclosure documents mandated by regulation have been in the past: mutual fund prospectuses, annuity contracts and the like are notoriously and deliberately shrouded in legal language that the average client cannot or will not understand.
A better rule, and one we hope to see in the future, is a simple Universal Fiduciary Standard for all planners, advisors, and salespeople working with the retail financial services consumer. By applying the same standard to the sales-paid portion of our industry that regulators already require of fee-based Registered Investment Adviser firms, the public will, finally, be the beneficiaries of our industry, instead of all-too-often, is prey.
Consumers concerned about whether their advisor is always required to operate in their best interest and represent them as full legal fiduciaries should seek out an appropriately registered RIA firm, such as ours, with which to do business. RIA firms chose voluntarily to be held to the much higher standard of being a fiduciary for every client, from their first day and first dollar invested. As long as nVest Advisors remains a going concern, that will not change for us.
Reg BI was a very small step in the right direction but regrettably is far too weak to make any meaningful impact on our industry or protect consumers from the predatory practices that wreak havoc in our industry. We urge the SEC and state regulators to push for stricter, more complete fiduciary standards.