Over the past few months, we’ve talked about the major regulatory changes adopted by the U.S. Securities and Exchange Commission last June. These changes will impact every investor, especially next summer when a new disclosure (the CRS) will come their way. CRS stands for “Customer Relationship Summary,” and it will be required to be delivered to existing and prospective customers of both broker-dealers and registered investment advisers.
To help you understand how the CRS might play a part in your financial decision-making, you may want to start by paying a visit to the SEC’s website at https://www.investor.gov/CRS.
The CRS will open the door to questions about your current financial professional and potentially lead to making a change. You’ll find four high-level videos narrated by SEC Chairman Jay Clayton that address the differences between brokers and investment advisers:
1) “Brokers and Investment Advisers — Know the Difference” at https://youtu.be/FZNCce1spHQ.
2) “Brokers and Investment Advisers — How They Get Paid” at https://www.youtube.com/watch?v=talDyeUwsWE&feature=youtu.be.
3) “Brokers and Investment Advisers — Which Is Right for Me” at https://youtu.be/PX-WXjTw5OY.
4) “Brokers and Investment Advisers — What Else to Think About” at https://youtu.be/pY6vz1O3MBg.
So, how do you determine whether a broker or investment adviser is right for you?
As Chairman Clayton remarked in the third video, “It really comes down to what you are looking for, for example how often you plan to buy and sell securities; how involved you want to be in the decision to buy and sell; whether you want someone to manage and monitor your portfolio on an ongoing basis; and whether the costs line up with the services you need or want.”
From my perspective as someone with decades of experience in both environments (broker-dealer and registered investment adviser), I agree with Chairman Clayton. The decision is one that cannot be made for an investor. Both are good services, as long as the investor can understand the differences enough to choose the service that is appropriate for him or her.
Chairman Clayton goes on to suggest that you think about your choices this way: “Do you want someone managing your account on an ongoing basis based on your broad financial goals and needs and movements in the markets? If so, an investment adviser may be best for you. Or, do you plan to buy a few stocks, bonds, mutual funds or ETFs and hold them for the long term with a few adjustments over the years? In that case, a broker may be best for you.”
Once again, agreed.
No matter your choice, you will also benefit from reading about how to protect your investments at https://www.investor.gov/protect-your-investments.
There you will find how to do your “due diligence” through research tools that you can find online and through other resources. For example, a free resource is EDGAR, an SEC site that helps you decide if a stock, mutual fund, ETF or variable annuity might be right for you. To read about how to use EDGAR, go to https://www.investor.gov/research-before-you-invest/research/researching-investments/using-edgar-research-investments.
Another excellent resource is Investor Bulletin: Mutual Fund Classes, which you can find at https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-mutual-fund-classes. There is considerable confusion on the part of investors about share classes.
Another Investor Bulletin worth reading is Mutual Fund Fees and Expenses at https://www.sec.gov/oiea/investor-alerts-bulletins/ib_mutualfundfees.pdf.
Finally, I’d recommend that you also read 10 Ways to Use Investor.gov, which will give you a lay of the land on how to use the site. This is a gold mine for investors and savers. The information is created by the SEC’s Office of Investor Education and Advocacy, which is dedicated to individual investors’ needs.
As noted on OIEA’s website: “We cannot tell investors what investments to make, but we can provide them with unbiased information on investment decisions and on protecting themselves from securities fraud or abuse.”
That’s a very valuable service, one that every individual investor should take advantage of.
To read Julie Jason's books, go to: https://juliejason.com/books/julies-books.