FPA Members Support
The Financial Planning Association (FPA) has brought
the weight of its membership to bear in the debate over whether CFP
certificants should be held to a fiduciary standard.
In a recent survey, the FPA announced, 87% of its responding members said they would support the inclusion of a fiduciary duty under the CFP Code of Ethics that would require certificants to act in a client's best interest. Of the 1,773 FPA members who responded to the survey, 10% did not support the inclusion and the rest were unfamiliar with the issue or had no opinion.
"The survey again shows the high ethical standard which planners themselves believe should be the hallmark of their work," FPA President Daniel B. Moisand said in a prepared statement. "The vast majority of FPA members are clearly willing to be held accountable to a client-first standard."
The idea of financial planners acting as a fiduciary for clients has become a touchy subject within the planning field for a number of reasons. The survey comes at a time when the CFP Board of Standards is prepared to release a revision of its Code of Ethics, possibly as early as the end of June. The CFP Board's Board of Governors has been under pressure to include a fiduciary standard as part of the revision, but the board has signaled this will not be the case.
In a recent interview, Barton C. Francis, chair of the CFP Board, said the inclusion of the word "fiduciary" in the ethics code would be problematic because it has multiple meanings depending on the legal jurisdiction. "The word itself, if not put into context, has all different kinds of meanings in all different kinds of locations."
FPA is also in the midst of waging a court battle against the Securities and Exchange Commission over a rule that exempts brokers from the Investment Advisers Act of 1940. One of the FPA's key objections to the rule is that it allows brokers to work under the CFP mark without an obligation to put a client's interests first, so long as they adequately disclose this fact to clients.
The survey released by FPA was sent to 22,373 members via e-mail in early May. Responses were received from 1,773 members, according to FPA. FPA has a total of about 28,000 members, but several thousand have not provided the FPA with an e-mail address for organization mailings, according to FPA spokesman Brad White.
About 1,460 respondents are CFP certificants, according to the FPA. When given a list of views on the SEC's exemption rule, 50.67% of respondents chose, "I disagree with the SEC guidance because it allows brokers to use the CFP marks simply as a marketing tool."
The second most popular response, chosen by 16% of respondents, was, "I disagree with the SEC guidance because it might give consumers the impression that the broker will act in their best interest and is providing financial planning services."
NAPFA Honors Bradley For Exemption Stance
The president of TD Ameritrade Institutional has been honored by fee-only planners for his opposition to the broker-dealer exemption to the Investment Advisers Act of 1940. Tom Bradley was given the 2006 Special Achievement Award by the National Association of Personal Financial Advisors (NAPFA).
The award is given for extraordinary contributions in consumer protection and the advancement of the financial planning profession, according to NAPFA. Previous winners include New York Attorney General Eliot Spitzer and financial writer Bob Veres.
In giving the award to Bradley, NAPFA lauded his company's support of placing broker-dealers who offer fee-based services under the jurisdiction of the Advisers Act. The SEC ruled last year that broker-dealers, under certain conditions, may offer fee-based services while being exempt from the act.
NAPFA and other groups representing consumers and advisors opposed the ruling, which is being fought in a lawsuit filed by the Financial Planning Association (FPA). "Fee-based brokerage is being marketed as investment advice but broker-dealers don't operate under the laws created for investment advisors," Bradley said in a statement after accepting the award. "This has created confusion and exposed investors to potential harm."
Focused On The Top,
Focus Grows Again
Focus Financial Partners LLC, which in less than a year has expanded into one of the ten largest independent wealth management firms in the nation, has just gotten bigger. The New York City-based firm announced that it has acquired the wealth management firms of HoyleCohen Inc. of San Diego and Resnick Investment Advisors LLC of Westport, Conn.
The addition of the two firms brings Focus Financial Partners' assets under management to $4.5 billion just six months after the company was founded by CEO Rudy Adolf. Adolf has set out to give the new firm a swift national presence through a series of acquisitions.
Backing him in the plan has been Summit Partners, a private equity and venture capital firm that provided Focus Financial with $35 million in financing at its founding. Summit Partners, which has $9 billion under management, is the firm's lead investor.
"We're not number one yet but we're getting there," Adolf said in a recent interview. "Our aspiration is crystal clear: Within a very short time frame we will be the leading independent fiduciary wealth management firm in the country."
HoyleCohen was founded in 2002 through the merger of wealth management firms owned by Kevin Hoyle and Joseph Cohen. "We joined Focus for its unique model that maximizes the benefits of autonomy while benefiting from the resources, scale and best practices of a large national firm," Hoyle said.
Martin Resnick, partner and managing director of Resnick Investment Advisors, said, "Through Focus we will be gaining access to the ideas and expertise of a network of highly respected wealth management firms across the country, which we believe will benefit our clients."
In previous interviews, Adolf has said that each partner, or member firm, becomes a subsidiary of Focus Financial Partners, sharing a portion of Focus Financial's profits while retaining control over its own client services and local business operations.
Focus typically acquires 40% to 60% of a selling firm's ongoing economic interest in exchange for cash and an ownership position.
Among the criteria Focus Financial uses in selecting acquisitions is that the potential partner must act as fiduciaries, putting their clients' interests first; use a systematic and professional process for advice and planning; and provide services in a fee-based structure. The company's current plan is to target 30 to 50 transactions over the next three to five years.
"There is a group of firms that has reached a level of scale, of professionalism in terms of client impact, where ultimately our model can be very helpful in enabling these firms to reach their goals," said Adolf, a former partner at McKinsey and Company in New York and most recently senior vice president and general manager of the American Express Global Brokerage Banking Division.
Planners Stay Happy Despite Earnings Decline
Financial planners with CFP certifications are mostly satisfied with their careers, despite seeing their median incomes drop in 2005, according to a new survey.
The 2006 Survey of Trends in the Financial Planning Industry, published by the College for Financial Planning in Greenwood Village, Colo., also found that 53% of planners earn a combination of fees and commissions.
The survey found that 80% of planners who hold a CFP certification have a high level of career satisfaction and median 2005 annual earnings of $232,995.
The earnings are down from $277,800 in 2004, according to the survey.
Based on 419 responses to e-mail queries to CFP certificate holders, the survey also found that 67% of planners are 40 to 59 years old and that 57% have 10 to 24 years of experience in the field. Survey participants with 20 to 24 years of experience reported a median income of $427,937.
Typical clients consist of a two-income couple, 55 to 64 years old, with annual gross income of $100,000 to $149,000 and an annual discretionary income of $10,000 to $19,999.
Among the other findings:
Fee and commission planners comprised 53% of the respondents, while 35% were fee-only planners.
Median gross earnings were up from $200,000 in 2001.
Advisors Optimistic About Economy
For the second month in a row, advisors have leaned toward optimism regarding the economy, according to Rydex Investments.
The company's Advisor Confidence Index (ACI) went up slightly in May-from 115.8 to 115.9. In April, the ACI went up 3.99 points after a three-month slide.
The index, which gauges advisor outlook on the economy and market through monthly surveys, found that advisors were more positive about the short term than the long term.
Broken down by components, the ACI found that advisors grew more positive about the current economic outlook by 3.07% and the six-month outlook by 0.43%.
The outlook grew negative as the view went further out, however. The positive outlook decreased by 2.07% in regards to the 12-month outlook and by 1.63% in regards to the stock market.
Investors Not Heeding Advice, Survey Finds
Individual investors are apparently paying little attention to the myriad of commentators, advice books and articles that advise on the proper way to buy a mutual fund, according to a recent survey.
A survey released by the Consumer Federation of America (CFA) concluded that a majority of individuals ignore such advice and shoot from the hip when it comes to selecting mutual funds.
Among the findings:
Only a third of current fund owners considered either cost or volatility to be very important when making their most recent mutual fund selection.
Only 40% considered the fund's risks to be very important.
Most investors indicated that they give greater weight to a fund company's reputation and the past performance of the fund compared to other funds.
Only 28% of investors who relied on advisors to make their mutual fund selections did any of their own research to investigate the chosen funds.
Investors rarely reference fund disclosures while shopping for funds. Only 37% of purchasers said they considered a prospectus highly important. Other types of documents, such as fund summaries and ranking services, were considered less important.
"In some cases, the survey findings may reveal a failure on the part of investors to take important steps to protest their interests," says Barbara Roper, the CFA's director of investor protection. "In these cases, the challenge for investor educators is to figure out how to convey essential information more effectively. In other cases, however, the problem may be that the expert recommendations are simply unrealistic or fail to reflect the different needs of different types of fund purchasers." The survey was conducted in September 2005 by Opinion Research Corporation. It was based on responses from 2,048 adult Americans, 43% of whom identified themselves as mutual funds owners.
CFP Board Disciplines Ten
The CFP Board of Standards announced the revocation of two advisors' right to use the CFP mark and the suspension of seven others, due to disciplinary violations.
The disciplinary actions, which also included a letter of admonition to one planner, resulted in Darrel E. DeMarco of Tallmadge, Ohio, and Solomon O. Onita of Houston permanently losing the right to use the CFP certificate.
DeMarco's certification was permanently revoked in March after he failed to respond to a CFP Board complaint regarding an order he entered with the NASD in which he consented to findings that he forged the name of an official at his firm on a corporate resolution guaranteeing that his firm would stand behind automobile loans and leases entered into by an automobile dealership with professional athletes whom DeMarco hoped to attract as customers.
Onita's certification was permanently revoked in January after he failed to respond to a board complaint that he was improperly using the CFP mark for at least two years after his certification had expired, according to the CFP Board.
In other cases, the board suspended the certifications of Carla L. Chastain of Rogers, Ark.; William Alan Gay of Greenwood Village, Colo.; James J. Reilly of Mamaroneck, N.Y.; Richard A. Daniels of Chagrin Falls, Ohio; Kyle Holland of Austin, Texas; Michael C. Hirschi of Sandy, Utah; and David A. Duryee of Seattle.