This article originally appeared on Financial Planning by Andrew Welsch.
With no clear winner yet in the presidential election, advisors and clients will have to wait a bit longer to find out the ramifications for financial planning.
Several key battleground states were still counting ballots as of midnight Nov. 3, and election officials cautioned it could take time to reach a final tally.
From potential tax changes to regulatory shifts, there’s much at stake for the country and wealth management. But it’s all on hold until a winner is certified and headed to the White House in January. Here are highlights of what either candidates’ victory could mean for advisors and clients.
What a Biden win means
If Former Vice President Joe Biden emerges victorious, his administration would pursue a more investor-friendly regulatory approach, according to experts and industry observers.
“The contrast is likely to be night and day even if you get an [SEC] chair who is on the more moderate end of the spectrum,” says Barbara Roper, director of investor protection for the Consumer Federation of America.
The SEC’s controversial Regulation Best Interest would be at the top of the list for revision. The rules package, which went into effect earlier this year, changed advisor and broker standards of conduct. Critics — including the SEC’s own investor advocate — charge it tilted the playing field in favor of brokers and poorly defined what best interest means within the context of the regulation, among other criticisms. For example, the Form CRS document firms are now required to provide to clients expressly prohibits RIAs from mentioning that they are fiduciaries.
“I don’t think RIAs sufficiently appreciate what has happened with Reg BI and Form CRS. It has effectively done away with the Advisor’s Act,” says Knut Rostad, president of the Institute for the Fiduciary Standard.
Still, how a Biden administration would handle regulatory change remains an open question. Revision may not result in wholesale replacement by a Biden-appointed SEC chair. New leadership at the regulator may opt to focus on giving Reg BI more enforcement teeth. In other words, they may choose to renovate an existing house rather than tear it down to build anew.
“If they scrap Reg BI entirely, then that is a long process of putting together new regulations, have a new comment period, and have a vote. But if they were to issue guidance on what best interest actually means, they could do that quickly,” says Laura Posner, a partner at law firm Cohen Milstein and former bureau chief for the New Jersey Bureau of Securities.
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