SEC Best Interest Regulation

Dear Clients and Friends of ZWM,

Early last month, after several years of discussions, hearings, staff research, and lobbying by Wall Street, the SEC came out with a new regulation to govern the brokerage side of the financial advice industry.

The rule is referred to as Regulation BI (Best Interest), which is intended to ensure that financial and investment advice be in the best interest of the client. Sounds pretty basic doesn’t it? Our sarcasm aside, it is an improvement: in the past, brokers only had to make recommendations “suitable” for their clients, a much lower bar to clear. 

But unfortunately, the new regulation does not deliver for investors.

Let me provide some background. Since our founding in 2003, ZWM has adhered to a Fiduciary Standard; a more strenuous standard than the “best interest” regulation. As fiduciaries, we (and many other firms) are bound to provide advice and make recommendations that put our clients’ best interests ahead of our firm’s interests. We strongly believe this is the only way for us to do business, and we shall continue to adhere to this Fiduciary Standard.

However, the SEC, in its new regulations, allowed a loophole in this standard. In the past, the SEC required we seek to avoid conflicts of interest, and make a full disclosure of any unavoidable material conflicts of interest. This is the standard we have lived by and by which we will continue to abide.

The loophole that the SEC created: the new regulation defines the fiduciary standard as seeking to avoid conflicts of interest, or making a full disclosure of all material conflicts of interest.

By simply removing the “and” then substituting “or” the SEC makes it ok to “hide in plain sight” the conflicts that may exist for many advisers. After all, do most investors actually read the 100 or 200+ page prospectuses/disclosure documents that accompany recommendations from many advisers? We think not.

So, in summary, we at ZWM will continue to honor the Fiduciary Standard as we have in the past: we will always act in our clients’ best interests, period. We will continue to put their interests ahead of our own interests, and we will continue to disclose any conflicts where they exist (doing so in plain language, not hidden in hundreds of pages of legalese).

If anyone in your life could use fiduciary advice, or if you have any questions about this or any other matters, as always, please feel free to contact us.

Thank you,



Tom Zimmerman, and all of us at Zimmerman Wealth Management, LLC™