At my first client meeting as a financial advisor, I sat across from a man 25 years my senior, and tried to explain to him the difference between the A share, B share and C share of the mutual fund I was recommending. He interrupted me and said, “whatever one you think is best.”

I was 27 years old and basically had his life — or at least his quality of life in retirement — in my hands. That scared me to death, but it made me want to get it right. I realized two things that day: 1) I was horrible at explaining things, and he probably wanted to shut me up, and 2) I had a great deal of power sitting at that table. I have carried both lessons with me throughout my career.

I have improved at explaining complex concepts to clients, but the power I have in making recommendations to clients still humbles me and has never been more relevant today.

On Wednesday, the SEC voted on their much-talked-about fiduciary rule, only nowhere in the best-interest language of the rule do they mention the word fiduciary. The rule’s intent is to alleviate the confusion individual investors often have around their relationships with financial professionals (specifically, the difference between a broker-dealer and an investment advisor).

Tiffany McGhee is a partner at Momentum Advisors, where she heads the firm's institutional client services practice. Previously, she worked for TIAA-CREF.
“This vote should inspire RIAs to blast out emails, write white papers and take to Twitter to remind everyone that we are the only true fiduciaries in the industry,” writes Tiffany McGhee.

Brokers currently have a so-called “suitability” duty, but not a “fiduciary” duty. With the best interest regulation in the new rule, they would now have a duty to act in the “best interest” of their retail client. Confused yet? I’m betting clients will be, too.

The name game continues as the rule further explains that some brokers will not be allowed to call themselves “advisers” or “advisors” as that may be confusing to clients. So, they would then be called what? Brokers? That certainly clears everything up!

If the 1,000-page attempt to demystify the client-advisor relationship wasn’t enough, investment advisors and broker-dealers will have to present clients with a relationship summary (not to exceed four pages) detailing the difference in services offered, legal standards, fees and conflicts of interest of both investment advisors and brokers. So, now clients will be given extra homework on top of the prospectuses and retirement fee disclosures that we all know they read in full.

This approach doesn’t solve anything.

Clients seek advisors precisely because they are not experts themselves. It is absolutely reasonable for a client to assume that a financial advisor will give them the best advice for their situation. It’s safe to say that most people don’t know the difference between a broker, a financial advisor and an investment advisor. Just as one would hire a doctor to manage your health or a CPA to bless your taxes, clients assume all of us have the knowledge and insight to steer them in the best direction for their personal situation. So why didn’t the SEC go all-in and actually call for broker-dealers to be fiduciaries? It’s hard to explain to a client in 15 seconds the real differences between a broker-dealer and an investment advisor. I’m guessing that’s why the rule is calling for a multi-page chart.

The idea of enlisting the skills of a trusted advisor is common in our culture. Again, doctors, lawyers and CPAs all have a defined skill set and most of us are clear that in their role, the client’s needs come before their own. The public also seems to be very clear on the difference between a doctor and a nurse, a lawyer and a paralegal, and a CPA and a tax preparer who only does their taxes. Again, this concept is not entering the realm of absurdity. However, with this rule, the line between investment professionals remains blurred.

The fact that the blurred line between the different players exists at all gives many clients pause. Add to that, many past high-profile scandals involving dishonest professionals and unsavory encounters with stock brokers who act like used car salesmen, and it’s clear our industry’s reputation could use a win. I believe that transparency and clarity will increase competition among financial professionals and ultimately make us all better advisors.

Until then, the SEC’s proposal is great news for RIAs who have always been held to a fiduciary standard. We include this status in our marketing materials, note it in meetings with prospective clients and basically shout it from the rooftops. The BD world has tried to hang their hat on suitability, and if you close your eyes a little and squint, they almost look like fiduciaries — but not really. This vote should inspire RIAs to blast out emails, write white papers and take to Twitter to remind everyone that we are the only true fiduciaries in the industry. This is kind of a big deal. So, let’s take our moment.

The bottom line: The path to clarity seems to lie in making that fuzzy line bold. Brokers that list “financial advisor” or any variation of the term on their business card, and sell securities, should be a fiduciary. Anything less makes our industry look less like a community of professionals with standards and genuine concern for our clients. We should be blaringly transparent in our dealings with the people who trust us with their money and the quality of their lives.

RIA firms are experts at navigating the fiduciary world, and we would like to thank the SEC for ensuring that our club is still exclusive.

Tiffany McGhee

Tiffany McGhee

Tiffany McGhee is a partner at Momentum Advisors, where she heads the firm's institutional client services practice. Previously, she worked for TIAA-CREF.