A diverse potential client base is best served by a diverse array of practitioners, and meeting the public need for help starts on campus. We need more educational institutions to elevate financial planning to an academic major of prominence. That only happens if the programs draw more enrollment, and that happens, in turn, when students get jobs. On many campuses, the dominant presence is not professional planners—it’s the big financial services companies looking to fuel their sales machines. We need practitioners on campus to boost awareness, recruit students and educate them (and their parents) about the existence of the profession and what professional planners actually do.
We also need more planners to grow the profession and improve the succession prospects of true professionals. If we aren’t careful, the private equity money and other large institutions buying up practices will take over the delivery of a very personal service and neuter the ability of practitioners to personalize what they do and be as effective. Sound harsh? Take any doctor over age 55 to lunch and ask how medicine has changed in the last 30 years as various groups have bought out private practices. Chances are good those doctors will say that they face impediments to truly caring for patients and delivering the best care, and they are not happy about it.
We need member organizations to become stronger and expand their services to better serve members as the landscape continues to change. The FPA recently set itself back with a bad rollout of a worthy project—revamping its chapter system. I don’t think it will harm the organization as much as “CFP Lite” hurt the CFP Board, but there is damage there that will take time to repair, and I fear that while the FPA spends so much time, energy and resources on the chapter issue, other critical issues may be neglected.
The association once had the means and the will to stand up to the SEC. Do the FPA and its Financial Planning Coalition partners have that now?
Is the profession going to let stand the commission’s nonsensical interpretation of “solely incidental”? That phrase is how the ’40 Act determines the behavior of brokers who might begin to act as advisors. They can provide that advice and not get caught up in the regulators’ crosshairs as long as the advice is, again, “solely incidental.” In its Release No. IA-5249, the agency states that broker-dealers’ advice meets the definition of “solely incidental” if provided “in connection with and is reasonably related to the broker-dealer’s primary business of effecting securities transactions.”
If the advice is coming from a B-D, how can it not be “in connection with and is reasonably related to” the B-D’s primary business? If that language is allowed to stand, there is no advice that can come from a B-D that would be subject to the more rigid ’40 Act rules other than discretionary advisory accounts. The SEC does not have the right to rewrite the law. Who will call them on this?
Our profession has a sounder foundation today in large part because of the CFP Board’s advances over the years. We now have an excellent set of high standards for license holders. But the organization is also facing a critical situation after an exposé in The Wall Street Journal by Jason Zweig that showed a site the CFP Board ran lacked Finra disclosures about complaints and disciplinary actions against advisors.
High standards lose their meaning if we do not have effective enforcement. The Journal’s high-profile exposure of this gap is embarrassing and angers me, frankly. There is too much of a mismatch between what the CFP Board says it’s doing to vet its mark holders and what it has actually been doing to ensure that promise is kept.
Nonetheless, there is another implication of the Journal piece to note. Assuming the board tightens things up, the “designation wars” of old are over, and the CFP marks have won. The Journal could have written about any of the other designations, but the author chose to go after the CFP license, clearly because it’s the leader. To paraphrase Winston Churchill, the CFP marks are the worst thing out there—except for everything else.
I am happy the CFP Board is taking immediate action to get to work on the issue. Its initial steps seem reasonable—the board is adding links to BrokerCheck and the SEC’s Investment Adviser Public Disclosure database to its online listings and it’s establishing a task force. I am still pissed, but also hopeful.