Regulations, Fiduciaries And Other Things
As the debate over financial services industry regulation rages, groups such as the National Association of Personal Financial Advisors (NAPFA) are taking their case to Congress. Diahann Lassus, the group's outgoing national chair and president of Lassus Wherley & Associates in New Providence, N.J., and Bill Baldwin, incoming chair and president of Pillar Financial Advisors in Waltham, Mass., recently sat down in New York City to talk about NAPFA's goals and the possible shape of regulation.

Q: What's your most pressing issue?
A: [D.L.] The financial planning coalition [NAPFA, The Financial Planning Association and The CFP Board of Standards Inc.] is putting a lot of our focus on making sure that financial planning is regulated as a profession.
[B.B.] To be regulated imparts an image that being a financial planner means something. It implies professional status. It doesn't have to be omnipresent. I'd be perfectly happy with a set of regular regulations and some sort of government mandate for disciplinary action.

Q: Has financial
planning arrived as a profession?
A: [D.L.] It's close. I think people recognize what financial planning is to some extent. But in terms of seeing it as a profession I don't think we're quite there yet because many consumers know from past experience that some people who call themselves financial planners aren't really qualified to do planning. I think having planners regulated would help make it more of a profession in people's eyes.

Q: So, you're one of the few people who actually wants to be regulated?
A: [D.L.] A congressional leader last week said we're the only group he's ever met who says, "regulate me."

Q: What are some other important priorities?
A: [B.B.] The desire not to be regulated by FINRA. That's largely an RIA issue. Another is that consumers are confused about the differences between the fiduciary standard and the suitability standard.

Q: Do you think the public really cares?
A: [B.B.] I think the public cares if they're misled or not properly treated. They understand about fairness and honesty. Given the compensation structure of brokerage firms, it's probably inconsistent to expect them to put clients' interests first. It's difficult to be a fiduciary when you're on the sell side and you underwrite things.

Q: Is that necessarily a bad thing? Do advisors always have to be fiduciaries?
A: [B.B.] No. I see
the retail and production side of brokerage firms being two different shops that could be set apart with different compensation models.

Q: Where do you see the debate over the fiduciary standard going?
A: [D.L.] Our sense is that they [suitability standard proponents] endorse a fiduciary standard to some degree by redefining it so that it's watered down from the current standard. The folks from SIFMA talk about harmonizing, which essentially means taking the fiduciary and suitability standards and averaging them together. That's not good for consumers. They're willing to raise the bar of the suitability standard to something else, but still not high enough for brokers giving advice. And it doesn't reach the bar for what we're trying to do with financial planning.

Q: You're probably aware that some on the other side of the issue see NAPFA as holier
than thou?
A: [B.B.] For many years they referred to us as Napfakrishnas. But we're trying to break down that image. Our large-firm initiative aims to make membership appealing to larger firms. I think our education programs are outstanding, and we want to promote the NAPFA brand as a place firms can go for educational resources.

Breakaway Broker Trend Slowing?
One of the industry's big stories of late has been the anticipated wave of wirehouse advisors heading over to the independent side of the business. The trend got a lot of hype during the heat of the financial meltdown when big Wall Street firms saw both their finances and reputations clobbered. Of late, though, there are differing opinions on the pace of the breakaway broker trend.