NAPFA launches campaign to distinguish fiduciary from ‘best interest’

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CEO Geoffrey Brown: 'The SEC's proposal is misleading and confusing for consumers.'

An organization representing fee-only investment advisers launched an education campaign Tuesday that it says will help consumers understand the difference between fiduciary advice and advice that’s in their “best interests.”

The National Association of Personal Financial Advisors explains what a fiduciary adviser is in an infographic and a series of GIFs. Consumers are encouraged to ask financial advisers whether they are a fiduciary, how they are compensated and whether they provide holistic financial planning.

The group is trying to draw a distinction between the fiduciary standard that investment advisers meet — in which they put their customers’ interests ahead of their own — and the Securities and Exchange Commission’s proposed Regulation Best Interest, which would require brokers to act in the best interests of their clients.

The SEC regulation is designed to raise the broker requirement from the current suitability standard. The SEC proposal would continue to regulate advisers and brokers separately.

NAPFA criticized the SEC for not defining what it means by a “best interest” standard for brokers, and asserted the bar would be lower than the fiduciary rule governing advisers.

“As an organization whose members are all fiduciaries, we want to be crystal clear: 'Best interest’ is not shorthand for fiduciary,” NAPFA chief executive Geoffrey Brown said in a statement. “The SEC’s proposal is misleading and confusing for consumers.”

The SEC could release a final investment advice reform rule as early as this summer.