In 2022, it seems odd that the profession you belong to would be facing an existential crisis as simple as one enduring question, “What is a financial planner? And who gets to use the name?”
Lawyers and doctors and nurses and accountants don’t have these problems, after all, even though those professions have certainly endured their own tumultuous histories. (In the Middle Ages, you might remember from school, surgery was performed by barbers—since they were the ones with the razors.)
This throwback argument over the name “financial planner” might seem like a tiring philosophical question by now. Yet it’s had awfully real and dramatic ramifications this year—so real they led to the dissolution of a longtime advisory advocacy alliance.
In July, the Denver-based Financial Planning Association said it would be pursuing a multi-year advocacy effort to pursue legal recognition of the term “financial planner” through title protection. That meant, ideally, a legal definition would emerge so that anybody using the title meets certain standards that protect consumers and advance the profession.
“Right now, anybody can call themselves a financial planner, and that’s the problem,” said Patrick D. Mahoney, the FPA’s chief executive officer, in an interview with Financial Advisor at the time. He added that 78% of the association’s members want that protection.
Within a few weeks, the ramifications of its new mission became apparent when the association said it was leaving the Financial Planning Coalition, its longtime lobbying partnership with the CFP Board and the National Association of Personal Financial Advisors. FPA board chair Skip Schweiss said the association’s new title focus was a major reason for the departure.
More specific reasons were left for observers to figure out. But some of the fissures among the coalition partners have become obvious. In making the announcement about title protection, the association notably failed to tie the definition of “financial planner” to the CFP marks, whose holders the association claims to represent. People behind the scenes said there was a strategy issue as well: The CFP Board wants to fight the title battle on the federal level, not in the states, which could lead to a patchwork of regulations and a burden on advisors whose clientele increasingly stretch beyond their states’ borders.
The Financial Planning Coalition’s likely foundering is dramatic, since the financial planning industry is smaller and has fewer lobbyists than its likely opponents in the insurance and banking industries, says Duane Thompson, an FPA lobbying vet. Those other industries are likely going to move heaven and earth to make sure their people’s hands aren’t bound by cumbersome title rules. The CFP Board officially bemoaned the coalition’s loss of the 19,000-member Financial Planning Association, saying it would be better if the financial advice industry could continue speaking with one voice.
Loaded Questions
The title question itself is extremely thorny. The FPA suggests its work would likely require advocacy efforts at the state and federal levels through both legislation and appeals to agencies like the Securities and Exchange Commission, though Mahoney was spare with details in July. If past battles over fiduciary roles are any indication, however, there will likely be much pushback from banks, lawyers, accountants and insurance agents over who can use the title “financial planner,” especially if anyone tries to marginalize those who do business a certain way, say by making commissions or otherwise merely recommending suitable securities or business deals.
“There’s an approach we can take federally and there’s an approach we can do state by state,” Mahoney said, being cautious not to say who it would pertain to. “And on behalf of our members, we’re open to either approach.” He added that his group wouldn’t likely introduce any legislation until 2024.
The FPA said it was making title protection the strategic focus of its advocacy for several reasons. “If federal and/or state policy makers continue to leave ‘financial planner’ undefined, some will take liberties with the title, even if they are not providing financial planning services,” the FPA announced. “Title protection will establish minimum standards for financial planners without creating an unnecessary regulatory burden for those meeting the standards.”
The association added that, since the profession is young, it doesn’t get the same degree of name recognition afforded medicine, law and accounting.
“Presently, there are no minimum standards for competency and ethics for those professing to be financial planners,” said Dennis Moore, the FPA’s 2022 president, in a statement. “Some credentialing bodies have their own prescribed standards, but policy makers have established nothing at the state or federal level.”