Planner Group Pushes For Higher Standards

(Dow Jones) A group of financial planners pushing for regulation of their profession is bracing for a long fight.

The Financial Planning Coalition wants to limit who can call himself or herself a financial planner, a title anyone can use today. The group wants ethical and competency standards for individuals who hold themselves out as financial planners, and a new regulatory authority to oversee self-described planners.

Another part of the group's battle-requiring financial advice providers to put their clients' interests first-has gained momentum after the Madoff scandal and the market meltdown of a year ago. But providing more clarity around the somewhat vague concept of financial planning isn't a priority now for lawmakers.

Still, the coalition says it will continue its campaign even if the U.S. Congress doesn't address financial planning in financial reform legislation.

"This issue does not go away," says Robert Glovsky, a certified financial planners in Boston and chairman of the Certified Financial Planners Board of Standards.

The coalition was formed in December 2008 by the Financial Planning Association, National Association of Personal Financial Advisors and Certified Financial Planner Board of Standards.

It wants financial planning-the process of providing comprehensive financial advice on investments, taxes, college saving and other matters-to be recognized as a distinct profession whose members must meet certain educational and ethical requirements. Most consumers don't realize that, unlike doctors and attorneys, individuals calling themselves financial planners aren't required to meet certain requirements, the coalition says.

Further confusing consumers is the hodgepodge of titles and regulatory structures within the industry. Brokers, who sell investment products, are regulated by the Financial Industry Regulatory Authority. They're required to do what's suitable, but not necessarily best, for their clients. Investment advisers, who provide advice for a fee, register with state security regulators or the Securities and Exchange Commission, depending on the amount of assets they oversee for clients. They're required to put their clients' interests first.

These financial professionals use a range of job titles-financial planner, financial advisor, wealth manager-making it even more difficult for consumers to recognize distinctions between their qualifications and obligations to investors.

The regulatory entity the coalition envisions for planners would fall under SEC oversight and wouldn't replace the existing regulators.

Congress is currently addressing the obligations of brokers and investments advisers to clients.

Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking, Housing and Urban Affairs Committee, circulated draft legislation in November that required stockbrokers to put their clients' interest first, as investment advisors are required to do now. The planning coalition would like this provision to remain in any legislation that moves through the Senate.

The group, which has hired a lobbyist, is also "searching for a champion" on the Senate Banking, Housing and Urban Affairs Committee to introduce the concept of financial planner oversight in proposed legislation, Glovsky says.

The House of Representatives passed its own financial-services reform package in late 2009, which calls for the Securities and Exchange Commission to define a fiduciary standard and determine when it applies to the various categories of financial advisors. The legislation also calls for the Government Accountability Office to conduct a study on gaps in the regulation of financial advisors.

If this study is included in a final bill from Congress, it would give the coalition a platform to continue pushing their cause, the group says.

Opponents of oversight for planners include insurance and securities groups that say it would add an unnecessary layer of regulation.

Still, the coalition remains hopeful.