Broker Check
New Regulations to Come

New Regulations to Come

June 05, 2020

Well, more regulation is coming. Some of you may remember the Department of Labor Ruling several years ago. Not to bore anyone, but basically the DOL took it upon itself to draft over 1,000 pages of regulation, that in the end simply stated that advisors had to act in the best interests of their clients. Of course, there is more to it than that, but the “best interests” concept was the core or spirit of the regulation. First, the DOL was reaching as far as its authority goes. DOL does stand for the Department of Labor, and the investment/securities industry already has more than one regulating body.  (It’s very possible that the DOL may have even stepped on someone toes with this document, but I won’t speculate). Second, the volume and cumbersome nature of the regulation’s implementation caused it to be challenged by nearly everyone that could be involved. After countless tens of millions of dollars were spent and probably hundreds of millions of labor hours in an effort to prepare and comply with the new regulations, they were never really implemented.

What the DOL did provide with its efforts was ample motivation for the Securities Exchange Commission (SEC) to get involved and begin to develop its own regulations. I think most people would agree that this is probably a more appropriate body to regulate investment advice. The nature of the regulation remains much the same. The advisor must act in the “best interest” of their clients.  This may all seem painfully obvious and even a bit silly to some. You would certainly hope that your advisor is working in your best interest. The problem really has a lot to do with the stated or traditional “standard of care” that much of the retail investment industry was built on, which is one of “suitability.” Just because an investment is suitable for an investor, may not mean that it’s in their “best interest.” A cheeseburger, some hot wings, a few adult beverages followed by a little cake and ice cream may be suitable for someone’s 21st birthday party. Yet, we all know that’s not in our best interest. “Best Interest” requires the advisor to “evidence” not only why the recommendation is suitable but also that it put the client’s interest first and has been compared to other options that could be available. 

The following is my take on this new set of regulations that will be implemented July 1, 2020.


  1. More paperwork for the client and advisor.
  2. A lot more work for advisors that actively make recommendations.
  3. Making recommendations on existing accounts that could benefit the client in the long run may not be made at all.
  4. It could become more difficult for clients and prospects with smaller account balances to find experienced advisors that work with them given the cost (to the advisor) involved.


  1. Advisors will be forced to do what they should have always done; document their advice.
  2. Limit or stop “product sales.”
  3. Encourage investors to talk through a plan before “buying” an investment or any financial instrument.
  4. “Encourage” those that don’t want the work to leave the industry or retire.