NAIFA Supports Strong Best Interest Standard

The association supports a Best Interest Standard that requires securities-licensed firms and financial professionals to act in the best interest of their clients.

In its efforts to advance the issues that are of interest to NAIFA members, NAIFA continues to provide input to regulators and legislators concerning proposed laws and regulations. A recent example of NAIFA’s advocacy in action is the association’s statement on the Securities & Exchange’s Best Interest Standard.

The written statement on the Standard was submitted by NAIFA President Jill Judd, FSS, LUTCF, to the U.S. House Committee on Financial Services, to be part of the record for the Subcommittee on Investor Protection hearing on the proposed Best Interest Rule.

The main message of the statement is that NAIFA supports a standard requiring securities-licensed firms and financial professionals to act in the best interest of their clients and the association believes that the SEC is the proper regulatory agency to enact and enforce the standard.

The SEC proposal represents a principles-based approach, with a high standard of conduct and clear obligations for financial professionals.

“The SEC’s general approach, we believe, significantly strengthens the standard of conduct for financial professionals, while preserving choice and access to advice and investment products for consumers at all income levels and account sizes,” Judd wrote.

Advantages of the SEC proposal

NAIFA believes the SEC proposal “contains a robust, substantive regime to protect investors.” Among the strengths of the proposal are that it would:

• Clearly require financial advisors to put the interests of clients above their own or those of their firms when giving investment recommendations.

• Allow the sale of diverse products under compensation arrangements that make sense for all types of investors.

• Contain simple and meaningful compensation and conflict-of-interests disclosure requirements.

• Use existing federal enforcement mechanisms.

Serving Main Street

NAIFA also encouraged the SEC to revise provisions in the proposal that would restrict the use of the titles “advisor” and “adviser” by broker-dealers and their registered representatives, but not by other professionals who provide advice on a wide variety of financial topics.

NAIFA members work with “Main Street” investors. A recent survey found that 83 percent of NAIFA members report that most of their clients have annual household incomes of $150,000 or less, and nearly one-third say most of their clients have incomes of $100,000 or less.

NAIFA believes that overly restrictive regulations, such as proposals that would make it difficult or impossible for advisors to receive commissions, would reduce middle- and lower-income consumers’ access to financial advice and services. Many of these consumers cannot afford out-of-pocket fees or maintain lofty account balances that are required by many non-commissioned firms

“The SEC’s proposal represents a principles-based approach with a high standard of conduct and clear obligations for financial professionals, but with a commonsense implementation framework that will allow diverse products and compensation arrangements to be offered in the marketplace,” Judd wrote in the NAIFA statement.

A call for action

In Congress and in the states, there will always be opportunities to advance issues of importance to NAIFA members. To make sure that NAIFA continues to make the most of these opportunities, please get involved and stay involved. Working together, we will continue to create a favorable business climate for you and the clients you serve.