Some 85 members of the Financial Planning Association spread out over Capital Hill Thursday to lobby Congressional lawmakers and their staffs for an unusual industry request: Tougher regulation and oversight.
While most associations spend their time on Capital Hill arguing to kill rules, FPA members and the group’s professional lobbyists told lawmakers that the Securities and Exchange Commission must create tougher rules and oversight—especially in its new “best-interest” proposal for brokers—if it hopes to protect investors from costly confusion and conflicts of interest.
“The fact that all we want to do is elevate the profession and transform the lives of our clients through financial planning is really starting to resonate on the hill,” said Catherine Seeber, a vice president and financial advisor with CAPTRUST, who has lobbied for the FPA five years in a row.
FPA is also lobbying for the restriction of the use of the term “financial planner” exclusively to those who have earned a CFP (certified financial planner) designation and for legislation to increase the frequency of SEC investment advisor exams. The SEC said it examined about 15 percent of registered investment advisers in fiscal year 2017, but that nearly 35 percent of all RIAs have never been examined.
At the heart of their agenda, the FPA is lobbying to encourage the SEC to create a fiduciary standard that tracks the CFP Board’s new code of ethics and standards of conduct. The board's baseline requirement is that “all CFP professionals place the interest of the client ahead of their own at all times.”
The SEC says it proposed the new initiative to ensure that brokers operate in the best interests of their customers and disclose conflicts of interest, including their business and compensation practices.
But the SEC’s current proposals fall short, the FPA argues. “From a competitive standpoint, does this let brokers do what you do without a fiduciary standard?” David Pickle, a partner at Wagner Law Group, asked the FPA crowd at a policy briefing before the FPA’s Fifth Annual Advocacy Day.
The FPA and securities attorneys including Pickle argued that the SEC’s initiatives essentially puts the onus on consumers to sort through legalese to decide if they think they’ll be better served by a “best-interest” broker or a “fiduciary” advisor, when the SEC could have solved the conundrum by elevating brokers to a fiduciary standard.
“As a consumer, when I see those words 'best interest' and 'fiduciary' I might pick a broker because I have no idea what fiduciary means,” William Nelson, CCO and deputy general counsel at Mercer Advisors, told FPA lobbyists.
The dearth of a fiduciary standard for registered representatives in the SEC’s new Reg BI proposal clearly rankles the organization. The FPA sued the SEC more than a decade ago to force the agency to apply such a fiduciary standard to broker-dealers and reps offering investment advice. While the FPA won on appeal in 2007, the SEC has managed for more than 10 years to find numerous loopholes for brokers, who today often charge advisory fees for the advice they provide.