Who Gets to Call Themselves ‘Advisor?’

What’s in a name? A lot, according to the North American Securities Administrators Association.

The association of state regulatory bodies does not want broker-dealer agents calling themselves “advisors” and approved changes to address that this week in its model rule for securities regulators. Agents who use advisor, or adviser, in their title could mislead clients into thinking they are working with a registered investment advisor who acts as a fiduciary, said consumer advocates, who widely supported the changes. NASAA also updated its conduct standards to more closely match those in the Securities and Exchange Commission’s Regulation Best Interest. 

But brokers and industry groups said existing regulations already provide consumers with those protections.

Whose Best Interest?

NASAA’s members, who include state, provincial, and territorial securities administrators, voted in favor of the revisions to the five-page guide, which was originally approved in 1983 and amended in 2022. States can (and often do) use model rules as the basis for their own regulations. Groups including the CFP Board, Financial Planning Association, Consumer Federation of America, and XY Planning Network wrote comment letters in support of the changes after NASAA proposed them. 

Sifma and LPL, among others, opposed some of the amendments, particularly those around the use of the advisor title. The new rule goes beyond Reg BI, which “permits associated persons of a broker-dealer who are supervised persons (i.e., employees) of an investment advisor to use the title,” Sifma wrote.

But the changes don’t go far enough, the CFP Board and others said. For example, dually registered reps shouldn’t be able to call themselves advisors unless they are wearing their registered investment advisor hat in a customer relationship, they said.

Level Out. The changes come as the Securities and Exchange Commission reviews whether to increase the asset threshold that determines whether investment advisors are overseen by states or by the SEC. In a speech this week before NASAA members, acting SEC Chairman Mark Uyeda noted that it had been 15 years since the Dodd-Frank Act raised the limit on mid-size investment advisors. The current rules allow:

• The SEC to generally oversee advisors with more than $100 million in AUM.
• States to regulate advisors with lower AUM levels.

Since Dodd-Frank was passed, the number of RIAs has increased by 45%, and the number with $100 million to $1 billion in AUM increased 53%.

Standard Issue. Fiduciary and consumer advocates have long been calling for clearer lines between broker-dealer reps and advisors who work exclusively as fiduciaries. With the NASAA changes, states may go further than the SEC does, if they adopt the amended rule, one advocate said.

“Kudos to NASAA for requiring a broker to be a registered adviser to use the adviser title. It’s a first step to clear messaging and ‘truth in advertising,’” said Knut Rostad, president of the Institute for the Fiduciary Standard. “Interestingly, while NASAA clarifies broker/adviser differences, the SEC in Form CRS minimizes them.”