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Reg BI

What is Regulation Best Interest?

By | 2020, Money Moxie | No Comments

By now, if you have accounts with SFS, you have received a new form called Customer Relationship Summary (CRS) from Securities America and an ADV Part 3 from Smedley Financial Services. So, why are you getting these forms, and what do they actually mean to you?

There is a new regulation that is designed to put your best interest first. It is called Regulation Best Interest, or Reg BI for short, and it went into effect on June 30th, 2020.

Reg BI requires an investment professional to act in your best interest and hold themselves to high standards of disclosing all important information, caring for their client, reporting any conflicts of interest, and maintaining strict compliance.

Form CRS is intended to explain the customer relationship with our Broker-Dealer, Securities America. This form clarifies the difference between investment services and advisory services and explains the difference between brokerage and advisory fees. It also details how the Broker-Dealer makes money and any disciplinary history for Securities America.

Form ADV Part 3 is specific to Smedley Financial. This form is intended to clarify the types of services we can provide, the fees you may pay, our fiduciary obligation to act in your best interest, any conflicts of interest, how we make money, and the fact that we do not have any disciplinary issues.

These forms are a good step forward towards putting a client’s best interest first. However, in my experience, most clients already expect this of their financial advisor.

The good news is that since the beginning, Smedley Financial has been a fiduciary and has always strived to put our clients’ best interests first. And we will continue to do so. For our clients, Reg BI should not have any meaningful impact. It should raise the bar for other “advisors” to make sure they hold themselves to the same fiduciary standard.

Reg BI also clarifies the sometimes-muddy waters of who can call themselves “advisors.” Professionals who just sell insurance or a product, or who only process trades as a stockbroker, cannot call themselves “advisors.” An “advisor” is someone who has the appropriate securities license to purchase stocks and bonds and is also licensed to give clients advice.

At Smedley Financial, we hold ourselves to an even higher standard by not only being investment advisors but also financial planners and life-centered planners. Our financial planning helps you figure out what resources you have, will have, and will need in order to meet your goals. Our life-centered planning helps you figure out how to live the life you want with the time you have left on this planet.

We appreciate you as clients, especially during these unusual times. If you have any questions regarding the forms provided or would like to review your plan, don’t hesitate to call us.

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Living In Unprecedented Times

By | 2020, Executive Message, Money Moxie | No Comments

The last four months have been record-setting in more ways than we could have imagined. The impact has been wide-reaching – and I am not referring to the COVID-19 virus numbers.

Technology has provided opportunities that have businesses, including ours, to service clients and continue to run their operations while working from home. It allowed students to continue their studies remotely and check in with their teachers when needed. We have access to almost anything: news, shopping, connecting with family and friends, and investment markets, all of which are amazing. In fact, it is hard to imagine what we would have done without technology.

Newer technology has opened the doors for people to save and invest at entry levels without barriers, such as minimum investments. Apps have become popular among the DIY crowd, which are too often young and inexperienced investors.

Securities regulators have spent countless hours creating Regulation Best Interest, as explained in Mikal’s article in this issue. Regrettably, they have done little to educate and protect DIY investors who are not prepared for the leveraged risks and hidden fees of this new world. One of these investors even paid the ultimate price.

An app on a phone gives anyone fingertip access to investing. One of these apps offers game-like screen appearances, prompts users to place trades when looking up a stock ticker, and displays falling confetti to make them feel good when placing a trade. These apps even allow investors to leverage their investment through options – something professionals are required to have tested and trained for before offering them to their clients. What these apps do not offer is common sense or an advisor to help investors understand the associated risks of specific investments. They lack education and risk assessment before making speculative, high-risk investments.

We have heard disastrous reports of investors borrowing on credit cards and accessing home equity loans to invest, only to lose the lion’s share of their investment. As financial advisors, we find this very disheartening.

All investors should be educated about their investment options, risks, and costs. Smedley Financial makes a concerted effort to provide you with information and education regarding investing through our Money Moxie and Money Matters newsletters, regular webinars, seminars, and, most importantly, one-on-one meetings with clients. If you have questions or need more information regarding finances or investing, please reach out to our wealth management advisors.

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