Despite many non-professional investors not understanding “the key differences between broker-dealers and investment advisers,” SEC Chairman Jay Clayton is continuing to take suggestions from the public regarding the obligations these two models owe to those depending on their expertise. That’s one of the takeaways Clayton recently laid out in a statement accompanying the announcement of an additional roundtable he plans to hold for Main Street investors.
Reporting insights gathered from his roundtable tour exploring a Best Interest proposal, Clayton noted that retail investors still want choice, in the form of both limited and wrap-around investment advice. They want to know that “investment professionals will exercise appropriate care in making recommendations and will not put their interests ahead of the interests of their customers,” he added.
To provide better clarity for retail investors confused about legalese, complicated graphics, and to address financial literacy that’s “far below where [it] should be, particularly in light of the increasing responsibility of individuals to plan for and fund their own retirement,” Clayton will be directing the SEC to create a short educational video addressing key aspects of the public’s relationship to investment professionals.
The SEC chairman also shared that advisors should expect to answer the question: “How much of my money is going to work for me?” It’s a favorite question of the chairman, who said, “Main Street investors do not want jargon from their investment professional or from the SEC. They want clear questions and clear answers.”
Clayton continued to advocate for the elimination of “high-pressure, product-based sales contests,” although that doesn’t necessarily mean an end to performance-based compensation, which he footnoted, saying it “may be an appropriate part of a firm’s compensation structure.”
Commissioners Kara Stein and Robert Jackson are expected to join Clayton at the next roundtable, scheduled for Sept. 20, in Baltimore.
