Could Reg BI be a business opportunity?
Written by Jasmin Sethi for Investment News
The SEC’s recently adopted Regulation Best Interest has spurred many industry participants to focus on the challenges for compliance. Often the typical response to a new regulation is to ask: “What can we do to satisfy this regulation and keep business as usual?”
Indeed, many have criticized the SEC for making its rule soft enough that business could continue largely as usual, unlike the DOL fiduciary rule, which was expected to change the landscape for the brokerage business model in a more drastic way.
But why is this necessarily the approach to regulation? Could regulation actually be a business opportunity that might allow some firms to distinguish themselves from their competition? If embraced, business strategy and regulatory compliance could be very complementary, especially in an age where investors are seeking greater transparency and comparability in investment services.
Here are three ways Reg BI could be an opportunity for business:
1. Keep it simple. Brokers could compete on the financial education pieces — those that are part of Form CRS as well as in the summary of material conflicts to make the fees and conflicts super clear.
Simplicity will likely win the day here. A simple business model of “we charge X for Y service and we do not get paid to recommend any product” is certainly easier to understand than a more complex one.
