Will investors really get choice tax breaks and investment incentives while advisors get stuck with a new regulator (maybe even the NASD)?

Investors and their planners have a lot to dream about these days. From meaningful tax cuts and juicier investment accounts to long-term care policy incentives and endorsed retirement plan advice, a spate of budget proposals and legislation is shaping up to bring millions of investors that much closer to smart planning and future financial freedom.

That's the good news, and there is a lot of it as lawmakers realize that Americans, especially those of us aging en masse, need as many nudges and incentives as they can provide to help us achieve financial self-sufficiency.

While these incentives will provide a plethora of opportunity for advisors, there are challenges on the horizon, too. The greatest among them is who will regulate planners and what that regulation will look like, especially in contrast to how competitors are regulated.

These issues will be pivotal as the Securities and Exchange Commission floats the notion of a new self-regulator for advisors. At the same time, the SEC is pushing to exempt many wirehouse brokers from advisor registration, even if they engage in advisory activities.

"It's an interesting time for just about everyone," says Barry Barbash, the former director of the SEC's Division of Investment Management and a partner in the law firm of Shearman and Sterling. "The world is changing," adds Barbash, a current director of the CFP Board of Standards, who predicts that the three-year bear market is starting to generate interesting fallout for advisors and the financial services industry at large.

Blurring Lines Of Advisor Regulation

Advisors will likely find life a little harder, at least inside the Beltway. Frankly, three years of bearish stock market returns aren't helping the reputations of any financial service providers, especially those who profess to offer investment advice.

In fact, as the FPA attempts to define the industry and profession of planning for its 28,000 members, resources-strapped regulators are intent on making investment advisor regulation more efficient and effective for the entire industry-and not necessarily in an advisor-friendly way.

Several controversial initiatives are likely to test the mettle of the FPA and its four-person Washington, D.C., lobbying group. In fact, the organization was delivered a blow at the end of January when the SEC, under outgoing Chairman Harvey Pitt, announced without warning it was seeking comment on the creation of a self regulatory organization (SRO) for investment advisors.

Not two weeks before, a high-level FPA contingent had sat with top cops from the SEC, the National Association of Securities Dealers and the North American Securities Administrators Association to cement relationships and lines of communications.