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February 01, 2010 |
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Planner Group Pushes For Higher Standards |
(Dow Jones) A group of financial planners pushing for regulation of their profession is bracing for a long fight.
The Financial Planning Coalition wants to limit who can call
himself or herself a financial planner, a title anyone can use today.
The group wants ethical and competency standards for individuals who
hold themselves out as financial planners, and a new regulatory
authority to oversee self-described planners.
Another part of the group's battle—requiring financial
advice providers to put their clients' interests first—has gained
momentum after the Madoff scandal and the market meltdown of a year
ago. But providing more clarity around the somewhat vague concept of
financial planning isn't a priority now for lawmakers.
Still, the coalition says it will continue its campaign even
if the U.S. Congress doesn't address financial planning in financial
reform legislation.
"This issue does not go away," says Robert Glovsky, a
certified financial planners in Boston and chairman of the Certified
Financial Planners Board of Standards.
The coalition was formed in December 2008 by the Financial
Planning Association, National Association of Personal Financial
Advisors and Certified Financial Planner Board of Standards.
It wants financial planning—the process of providing
comprehensive financial advice on investments, taxes, college saving
and other matters—to be recognized as a distinct profession whose
members must meet certain educational and ethical requirements. Most
consumers don't realize that, unlike doctors and attorneys, individuals
calling themselves financial planners aren't required to meet certain
requirements, the coalition says.
Further confusing consumers is the hodgepodge of titles and
regulatory structures within the industry. Brokers, who sell investment
products, are regulated by the Financial Industry Regulatory Authority.
They're required to do what's suitable, but not necessarily best, for
their clients. Investment advisers, who provide advice for a fee,
register with state security regulators or the Securities and Exchange
Commission, depending on the amount of assets they oversee for clients.
They're required to put their clients' interests first.
These financial professionals use a range of job
titles—financial planner, financial advisor, wealth manager—making it
even more difficult for consumers to recognize distinctions between
their qualifications and obligations to investors.
The regulatory entity the coalition envisions for planners
would fall under SEC oversight and wouldn't replace the existing
regulators.
Congress is currently addressing the obligations of brokers and investments advisers to clients.
Sen. Christopher Dodd (D., Conn.), chairman of the Senate
Banking, Housing and Urban Affairs Committee, circulated draft
legislation in November that required stockbrokers to put their
clients' interest first, as investment advisors are required to do now.
The planning coalition would like this provision to remain in any
legislation that moves through the Senate.
The group, which has hired a lobbyist, is also "searching
for a champion" on the Senate Banking, Housing and Urban Affairs
Committee to introduce the concept of financial planner oversight in
proposed legislation, Glovsky says.
The House of Representatives passed its own
financial-services reform package in late 2009, which calls for the
Securities and Exchange Commission to define a fiduciary standard and
determine when it applies to the various categories of financial
advisors. The legislation also calls for the Government Accountability
Office to conduct a study on gaps in the regulation of financial
advisors.
If this study is included in a final bill from Congress, it
would give the coalition a platform to continue pushing their cause,
the group says.
Opponents of oversight for planners include insurance and
securities groups that say it would add an unnecessary layer of
regulation.
Still, the coalition remains hopeful.
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Discussion
Should all advisors fall under one self-regulatory organization and could that happen on Mary Schapiro’s watch?
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