New Standards Set by the SEC on Transparency and Conduct for all Advisors
Human Investing is celebrating. Why? We have good news for you. While we’ve always been transparent at Human Investing, the rest of the industry is now required to catch up.
A new rule took effect on June 30th, designed to help provide investors with a transparent look at their investment professionals.
The U.S. Security and Exchange Commission (SEC) enacted the Regulation Best Interest rule which requires all Advisors and Brokers to provide their retail clients with Form CRS (an acronym for Client Relationship Summary).
Our firm has been promoting transparency with our clients for a long time. As a fiduciary, that’s what we stand for. We have experienced transparency leads to greater trust and better results with our clients and within our team. We are now excited to see that the rest of the industry is required to do the same. If you are working with an advisor, or plan to work with an advisor, this impacts news for you.
The intent of the Form CRS is to address the first PILLAR of the SEC’s three-part mission:
Protect investors
Maintain fair, orderly, and efficient markets
Facilitate capital formation
Regulation Best Interest and Form CRS were created with the intent to help investors protect themselves. Form CRS accomplishes this by requiring advisors to communicate information that an investor should know (e.g. conflicts of interest and how your advisor gets paid) in a clear standardized format. This new rule isn’t a panacea for all industry ills, however, the transparency provided by Form CRS will help investors better educate and protect themselves.
We also hope that transparency will affect wide change in our industry for the benefit of the investor. The impact of transparency we hope for is described well in Ray Dalio's book Principles.
"Radical transparency fosters goodness in so many ways for the same reasons that bad things are more likely to take place behind closed doors." - Ray Dalio.
So, what exactly will you be able to learn about your advisor via Form CRS?
The types of services a firm offers — are there services they offer that you aren't receiving?
The fees and costs you will have to pay for those services — this is especially important because there are many different fee structures
Conflicts of interest a broker or adviser may have — an estimated $17 billion is spent annually on conflicted advice for retirement savings in the US
The required standard of conduct associated with the services a firm offers
Whether a firm and its financial professionals have reportable legal or disciplinary history
Key questions to ask your financial professional
Want to learn about your financial advisor? Here is a link to the SEC's search engine of Form CRS - Form CRS Search Engine. See Human Investing’s Form CRS here.
If you have a question about Form CRS or you are interested in having a clear, transparent conversation about your financial plan, please contact us at Human Investing. We're here to help!
Sources:
https://www.sec.gov/Article/whatwedo.html