Regulation BI: It’s in Your Best Interest

In a recent blog post, I referred to Regulation Best Interest, also known as Reg BI. In this post, I’ll explain how it benefits you, the investor.

Why was it needed, and how does it affect you?

Until recently, investors were often victimized by unscrupulous advisors and slick sales pitches. Reg BI was put in place by the Securities and Exchange Commission (SEC) to stop those practices. Advisors must justify, in writing, why making the recommended investment is in the client’s best interest. The days of a client discovering a hidden restriction, which the advisor conveniently never mentioned, are over.

How does it work?

It requires advisors to do several things:

  • Only make recommendations that are in the client’s best interest. This includes any securities transaction or investment strategy involving securities. If it does not fit into a client’s objectives, financial circumstances, or tolerance for risk, the advisor may NOT recommend it. Liquidity restrictions, limitations on payments to beneficiaries could pose problems for the client and must be disclosed. The advisor must provide a written explanation showing why the product is in the client’s best interest.
  • Clearly identify any conflicts of interest the advisor may have in recommending a product. A conflict of interest arises when the advisor places his or her interest ahead of the client’s interest. Products with high commissions for the advisor, and high sales charges paid by the client, have an inherent conflict of interest. Sales contests, quotas, bonuses, and “non-cash” awards create an incentive for the advisor and must be disclosed to the client.
  • The advisor must consider “reasonably available alternatives” to the product he or she is recommending. Let’s say an advisor recommends a product with high costs and high commissions. He or she must explain in writing why it is better for the client than a comparable, low cost product.

One last, important point: Does the recommended transaction involve penalties and/or additional limitations? Certain types of transactions are particularly prone to abuse. For example,

  • Replacement or exchanges of variable life insurance or variable annuity products, especially when the client must pay surrender charges to make the transaction. Even worse, the new investment may very well have its own, brand new set of surrender charges.
  • Rollovers, transfers, or exchanges from low-cost liquid investments, such as mutual funds, to high-cost illiquid ones, such as non-tradable REITs. Why should you trade low cost flexibility for high cost rigidity? Good question, one the advisor would have to answer in writing.
 
At Advantage Financial Group, we have always put your best interests first and foremost. Accordingly, you will not notice any changes, other than a little more paperwork and a few more forms. Let us know if you have questions or would like us to address a topic in another blog post.

Tom Hurt, MBA

President

Tom has owned and operated Advantage Financial Group and its predecessors for over thirty years. He holds an MBA in Finance, has a General Securities (Series 7) license, and is an Investment Advisor Representative registered in 21 states.  He is also licensed for Life and Health Insurance, as well as Variable Annuities.  For over three decades, Tom has helped hundreds of clients successfully define and achieve their financial goals. Tom is a Registered Principal with Securities Service Network LLC and an Investment Advisor Representative with SSN Advisory Inc.

Tom divides his time between Wallingford, Connecticut and Carlsbad, California with his wife, Susan.  He has one son and two stepchildren.

Phone : (760) 494-6223 or (203) 269-4669
E-mail : tomhurt@afg-llc.net

Janet-Novak

Janet Novak

Financial Assistant

Janet has 26 years of experience in customer service, management, and has been recognized for excellent performance.  In 2016, she joined the securities industry as a financial assistant.  As a result of a merger in April 2022, Janet joined the AFG team.  Based in New York, her duties include client contact, new client onboarding, and servicing existing accounts.

Janet and her husband Rick spent 21 years of active duty in the Air Force.  They have lived in many locations, including three years in Germany.  They have two grown children and two grandchildren. Janet is an enthusiastic cook and avid gardener.

Phone : (845) 897-2034
E-mail : JanetNovak@afg-llc.net

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Jackie-Podewsa

Jackie Podeswa

Operations Manager

Jackie is the Operations Manager at the Wallingford, CT office of Advantage Financial Group. She started in the finance industry in 1997 as a part-time assistant at a predecessor company. That organization was merged into AFG in 2000, expanding her duties in operations.

Jackie is responsible for all office operations, working directly with clients to opening/maintaining financial accounts, IRA Rollovers, Required Minimum Distributions, setting up investment and withdrawal plans, mutual fund redemptions, and whatever else clients need. She has developed trusted relationships with clients, and provides first-class, personalized service, so important in today’s complex financial world. Personal commitment to the welfare of our clients is her strongest asset. Our clients appreciate Jackie’s individualized commitment to them. They know whatever issues they need resolved, will be handled professionally and personally. AFG’s main objective is offering excellent client service.

Jackie and her husband Bob have lived in Wallingford since 1989.  They are avid Yankees fans, enjoy traveling and spending time with their three children and two grandchildren. 

Phone : (203) 269-4669
E-mail : jackiep@afg-llc.net

Ray Hurt

IAR

Ray spent more than a decade working in Sales Operations and Logistics Management before joining the Advantage Financial Group team. He has a strong technological background, an analytic approach, and excellent interpersonal skills. This combination enables him to devise custom-tailored solutions that maximize results.

He holds a B.A. in Economics from Goucher College, and Series 7 and 66 securities licenses with FINRA. Ray lives in the San Francisco Bay area with his partner, Lisa, and their pet rabbit, Ziggy.

Phone : (760) 494-6223 or (203) 269-4669
E-mail : rayhurt@afg-llc.net

Susan Hurt

Susan Hurt, MAG

Office Manager

Susan has worked in the financial services industry in a variety of capacities since 1990. Her primary responsibility is to cultivate strong client relationships. Most recently, Susan has taken on the role of managing the company website and related social media. She manages all accounting and tax reporting for AFG.

Susan has a Master’s degree in Gerontology, which provides valuable insight and the sensitivity required to address the challenges our older clients may be facing.

Susan lives with her husband, Tom in Carlsbad, California. She has one stepchild and two children.

Phone : (760) 494-6223
E-mail : susanhurt@afg-llc.net