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Sunday, October 17, 2021

Hidden opportunities in the Reg BI

Regulation best interest software
  1. Key elements of the Reg BI
  2. Adopt a financial literacy focus  
  3. Simple solutions sell

Free trading, differences in generational marketing, and economic challenges are significantly changing the Financial Services Industry. Despite the original Fiduciary Rule being struck down last year, the Regulation Best Interest (Reg-BI) is making the roles and responsibilities of financial services professionals more dynamic and evolved than ever. In short, Reg-BI replaces the Suitability Standard and expands upon it similarly to the Fiduciary Rule. Now financial professionals can only make recommendations that serve the client first and must take action to maintain fiduciary due diligence. 

Key elements of the Reg BI

  • Disclosure Requirement: brokers-dealers must disclose facts about their recommendations and their relationship to the products. 
  • Obligation to client care: broker-dealers must use reasonable due diligence when making investment recommendations. In other words, they understanding the risks, rewards, and costs associated with the idea and inform the client. 
  • Avoiding Conflict-of-Interest: establish, maintain, and enforce written policies and procedures to identify and disclose or eliminate conflicts of interest. 
      • Correct conflicts that create an incentive for the firm’s broker-dealers to put the client second. 
      • Expand the menu of offerings away from offering only proprietary products. 
      • Eliminate time-period sales incentives that are based on the sale of specific investment products. 
  • Compliance Obligation: broker-dealers must establish and enforce these policies and procedures. 

Adopt a financial literacy focus  

In essence, the Reg-Bi is a regulation that forces advisors to give the service they’re meant to provide. By highlighting your firm’s history of meeting fiduciary standards, you may be able to attract retail investors or plan sponsors who are aware of the Department of Labor regulations and may be suspicious of financial advisors. Educating the most economically disadvantaged may make you an attractive fiduciary and aware of a client’s personal financial challenges. Millennial investors are already more willing to see a financial professional in person and could be viable prospects if you market your services with a financial education tone rather than with traditional sales strategies.

There’s a reason why the menu at a fine dining restaurant is one clean page or carved into a piece of driftwood – too many options and customers begin to think that the quality is diminished in favor of many options.

Simple solutions sell. 

Especially with a shift towards financial education, advisors and broker-sellers may see many benefits to reducing the number of products they offer to clients. Not only will offering tailored investment ideas make meetings easier for advisors to prepare and clients to understand, but the real opportunity comes when advisors shift towards more personalized investment ideas rather than simply offer a smaller selection. 40% of millennials will pay more for a product that aligns with their values and half prefer to see their financial advisor or broker in person. So, adopting a menu of ESG or SRI investment options could meet the Reg-BI obligation and give you a competitive advantage over most advisors who neglect these clients. 

Offering a more personalized service with an awareness of a client’s demographic-economic challenges may be an opportunity to build lasting and trustworthy relationships with clients. Depending on your recommendations and market, there could be advantages to carving out a niche business to serve specific client demographics. We wrote previously about the need for financial advisors to measure risk capacity in addition to risk tolerance, and that is just one tool to assess the client’s unique financial situation. An automatic risk questionnaire and streamlined email marketing campaign could mean adaptations to Reg-BI may lead to efficiency and better service to more clients. 

If most advisors will meet Reg-BI and continue with business as usual, then why does the industry need the regulation? Well, the financial advisors who value sales quantity over the quality of service will struggle to change their workflow while small firms are more nimble than major brick-and-mortar businesses. Just as many expected the industry to change after the Fiduciary Rule, the introduction of Reg-BI may fundamentally change the tone and type of relationship between client and broker-seller; for the better. Financial advisors who got into the industry to spread financial knowledge and help responsibly build wealth for their clients will prosper as they genuinely exceed the new regulatory standards. 

Forgive the self-indorsement, but Rixtrema’s financial planning software allows financial advisors to model the unique retirement situation and provide personalized service. Many of our marketing products can help to easily shift a firm’s marketing efforts and increase outreach. We follow and write about the most recent market and industry news and provide tutorials of our financial planning software platform at our blog. There you can also read about each product’s features, especially Larkspur Executive’s new marketing feature, Customized Trackable Marketing Letters, which can be deployed to streamline your marketing efforts. Feel free to contact our Client Success Team at to learn more about our products or articles.


regulation best interest software

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