Advisors are still in denial about Reg-BI

Advisors are still in denial about Regulation Best Interest

  1. Here are my key takeaways from the LINC conference.
  2. When the SEC knocks, how will you prove compliance?
  3. The Stars Point to Compliance
  4. Better to bargain
  5. We are here to help you with compliance.
  6. More to come from LINC 2020

Visit-Us-at-TDA-National-LINC-2020My colleague, Luke St. Angelo (RiXtrema’s VP of Client Success), and I had the opportunity to attend the LINC conference – an annual conference hosted by TD Ameritrade designed to connect RIA firms of all sizes with top tier mentor presenters and technology providers.

Here are my key takeaways from the LINC conference.

  1. Advisors want to do two things: Grow and provide high-quality advisor services consistently to clients. The conference agenda filled with topics catered to these intrinsic needs.
  2. Advisors, especially small firms, aren’t yet prepared for Reg-BI’s June 30th Compliance Deadline. This could put them at risk of penalties, which would jeopardize their growth.
  3. As a new regulation bears down on RIAs in fewer than 5 months, RIAs are in the “Denial stage” of accepting a new regulatory standard. And I can’t blame them. Regulation Best Interest, by the SEC’s own words, is designed to set new criteria around RIA and BD services. In essence, RegBI is an accusation that something is broken in the RIA and BD industry that needs to be fixed. That is not an easy opinion to hear. It’s an extra burden on the whole industry because of a few bad apples, but a burden nonetheless.

Do you remember those 5 stages of accepting a problematic circumstance (a.k.a. the Kubler Ross Stages of Grief)? Below we have the steps of New Bureaucratic Burdens.

Stages of New Bureaucratic Burdens

  1. Normal Existence: i.e., before the announcement of Reg-BI
  2. Receipt of Bad News: RIAs have new requirements under Reg-BI. It isn’t just for BDs. The CRS Form is, perhaps, their most substantial hurdle.
  3. Denial: Reg-BI will be struck-down just like the DOL’s Fiduciary Rule, and I’m already making “best interest” recommendations and over-disclosing to my clients and customers.
  4. Anger: I don’t need any compliance software because I have a legacy of providing services at a fiduciary level.
  5. Depression: This is just another regulation that is punishing the little mom and pop RIA or BD shop. There’s nothing
  6. Bargaining: The SEC expects Reg-BI compliance to cost $11k per advisor or broker-dealer! How can I move to mitigate that cost and prove them wrong?
  7. Acceptance: This is just the new reality of the industry, and I need to focus on how to remain efficient and compliant.
  8. The song repeats: Once you are accustomed to your new life, the government will introduce another new regulation, go back to step 1.

Kidding, of course, but the dance certainly played out to this cycle’s tune when RIAs prepared for the DOL’s Fiduciary Rule. But, don’t think for a minute that Reg-BI will play to the same score.

At LINC 2020, we listened to the regulatory and business concerns of dozens of advisors. We asked them how they will be preparing for Reg-BI compliance. First off, we observed an alarming number of RIAs who had never heard of Reg-BI or thought it was only for Broker-Dealers. Other RIAs, when asked how they believe Reg-BI will affect their firm, responded anywhere between:

“Well, it won’t affect me because I am already acting as a fiduciary.”


“Are you saying there’s something wrong with my quality of service? I’ve been serving some of my clients for X years and always over disclose and recommend best-interest products.”

When the SEC knocks, how will you prove compliance?

The reality is, RIAs are most likely already engaging with customers in a manner that meets RegBI’s new standards. BDs shoulder a more onerous burden – they will even have to stop referring to themselves as “advisors” and to their service as “advising.” We can’t say it enough.

Reg BI is not requiring you to reassess how you engage with clients but looking for processes and procedures that show and document due diligence.

The Stars Point to Compliance

On the third day of the conference, Regulatory updates became a key central focus of the schedule. Basically, experts urged RIAs and BDs not to be optimistic. RIAs asked pointed questions to the speakers about whether Reg-BI will be struck down before the June 30, 2020 compliance deadline.

Thomas E. Clark represented Wagner Law Group and delivered a very engaging and informative regulatory update and urged the audience to not leave Orlando without a plan to meet the demands of Reg BI and the SECURE Act (adopted on Dec. 20). The penalties for noncompliance are high – damage to your brand and disciplinary action.

Better to bargain

The stages of acceptance are not obliged or mandatory. So, don’t linger around anger or depression in how you move to compliance. Instead, jump into that 6th step of acceptance: Bargaining. The SEC expects each BD or RIA to pay roughly $11k to become compliant with Reg-BI, so firms must find lower-cost alternatives. And soon. Much of the expected costs of compliance relate to consulting with compliance firms – who will be in high demand in April and May – 2 months before the Compliance Deadline.

We are here to help you with compliance.

We prepared a free compliance guide and a CRS Form Checklist. It’s not a complete alternative, but it’s a start in the right direction. Likewise, our Reg-BI compliance guide can get you thinking about compliance in just 20 minutes. We also have an archive of Reg-BI topics and our compliance tool, RegBI Optimizer.

More to come from LINC 2020

Jay Wampler of TD Ameritrade talked growth options for RIAs and BDs and how to settle into a growth mindset to take advantage of opportunities. Then, we’ll review tips for hiring and working with Millennials and graduates from Gen Z. Finally, this blog will consider how to become aware of   from Dr. Stephanie Johnson, author of Inclusify.

Our podcast, Investing Counterpoint with Yon Perullo, is interviewing top financial professionals and marketers to learn more about business growth. Check out Yon’s interview with Michael Robinson (talking about new revenue streams), Eric Sobakken (working more effectively) and Jack Turk (writing better marketing letters to bring in more business).

You can also read some of our economic predictions, for what they’re worth, at our blog, We’ve covered BrexitIMF Global Growth Expectations, and are beginning to include Regulation Best Interest. If you have any questions about our financial planning software platform, then please contact our Client Success Team at

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