Industry Groups Want Oversight Board For Planners
A consortium of leading financial advisory trade organizations is calling for a professional standards-setting oversight board to establish financial planning standards for the industry. The board, as envisioned, would report to the SEC.

The proposal is the first significant policy work coming from the self-billed Financial Planning Coalition, an entity created late last year that comprises the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors. The coalition's raison d'être is to present a unified response to expected legislation in Congress that could reshape the financial services industry.

"The proposal is that the oversight board would regulate those who hold themselves out as financial planners, wealth planners and similar titles," says Kevin Keller, chief executive of the CFP Board.

Among other things, the coalition's proposed oversight board would work with the financial planning profession to set standards for training, experience and competence, subject to SEC review. It also calls for the board to enforce its rules and standards in cooperation with other regulatory bodies.

As part of its proposal, one of the coalition's chief -and perhaps controversial-goals is to hold the delivery of financial planning advice to the fiduciary standard of care that aims to put the interest of the client ahead of that of the advisor. The competing suitability standard of care required of Wall Street brokers requires them only to sell products and services that are suitable to particular investors, based on an investor's risk tolerance or investment goals.

"It's a little less controversial than it was more than two years ago when I started at the CFP Board," Keller says. He notes that FINRA's new CEO, Richard Ketchum, recently called for adopting the fiduciary standard for all advisors. 

In the letter announcing its proposal, the coalition posited the CFP Board as a logical choice to lead efforts to create the oversight board based on its role in setting and enforcing industry standards. Keller said it's premature to speculate whether the CFP Board would be the de facto oversight board.

Meanwhile, the coalition has been working the crowd in Washington. "We haven't seen a lot of other organizations on the Hill trotting out regulations for financial advice," says Duane Thompson, managing director of FPA's Washington, D.C. office. "A lot of activity on Capitol Hill is currently focused on the topic of the day. I think there's a void now [in the area of reforming financial advice], and we're filling an area that Congress hasn't turned its attention to yet."

Thompson says that while the coalition is taking a lead on regulatory reform of financial advice, it isn't operating with blinders on. "There are a lot of industry groups involved in giving advice and interested in what others are thinking, and we're giving them our perspective," he says.
Neil Simon, vice president for government relations at the Investment Advisors Association, says the coalition has kept his group abreast of its plans, but he couldn't comment much because he doesn't have many specifics. He says the IAA isn't sure where advisors fall under the coalition's oversight board proposal.

"One of the things we're curious to learn more details on is how they definitionally separate advisors and planners," says Simon, whose group represents SEC-registered investment advisors. "That's a critical detail.