Raymond James chairman and CEO Paul Reilly feels that the broker-dealer industry isn’t convinced that states pre-empting federal law is legal when it comes to fiduciary standards. In fact, he doesn’t rule out the issue ending up in court if states keep introducing fiduciary rules.

“[The industry is] going to wait for best interest [regulation] to come out and then have to deal with all the states and what they do — either through talking to them, or maybe through the court,” Reilly told reporters on Wednesday.

“The industry isn’t convinced that it’s legal for states to have their own standard. We do have federal preemption in securities regulation,” Reilly said.

He is instead “pretty confident” about the SEC coming out with its Regulation Best Interest in June this year. Though he says he does not conceptually agree with everything in the watchdog’s last draft, he concedes it is a “good, fair approach to balanced regulation.”

“From what we understand it allows for flexibility. But there’ll be some things that we have to adapt to — both from a rule standpoint and probably documentation,” Reilly explained.

On April 15, New Jersey unveiled its own fiduciary rule (currently open for comments until June 14, 2019). A little earlier that month, Maryland’s version of the fiduciary rule suffered an overwhelming defeat in the Maryland Senate Finance Committee. Nevada, another state with plans to adopt a version of the fiduciary rule, saw brokerages such as Morgan Stanley and Wells Fargo threaten to pull out of the state.

Meanwhile, as the industry chorus against individual state rules grows, the SEC is working to avoid any conflicts between its Regulation Best Interest and the state proposals.

Reilly said rules like the Department of Labor’s failed fiduciary rule and the seemingly more rigorous proposal by the state of New Jersey are bad for clients because they limit choice and increase the cost of servicing small clients.

“We are against the standards because it’s not the word fiduciary, how it's interpreted … it’s not the standard of care, it’s how it’s written. And we think it takes away client flexibility. I believe the DOL and people converting a lot of clients in the industry from commission to fee-based actually costs them money,” said Reilly.

A change in the regulatory landscape is also one of the biggest concerns for advisors at the Raymond James independent channel national conference, currently underway in Las Vegas. Reilly said that while Raymond James wants to be fully compliant, it will try to make the transition easier for its advisors.

“Our job is to make sure we have the experts in place, make sure we interpret them fairly, and try to find a painless as we can way for the advisors to transition. Because honestly, we've got to comply with everything, but their biggest value to their clients is spending time with them and helping them,” Reilly said.