Bid to regulate planning industry will soon run into opposition, leaders predict

The industry effort to regulate financial planning as a profession has support from within, but it won't escape opposition from other sectors of the financial services community, several industry leaders said last week.

The industry effort to regulate financial planning as a profession has support from within, but it won’t escape opposition from other sectors of the financial services community, several industry leaders said last week.

“There could be push-back from various industry sources,” Richard Salmen, departing president of the Financial Planning Association, said last week at the group’s annual convention in Anaheim, Calif.

In December, the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors formed the Financial Planning Coalition to lobby for legislation that would define and regulate financial planning.

But opponents of this coalition could include the securities, banking and insurance industries, as well as the Financial Industry Regulatory Authority Inc. The coalition has specifically said that Finra shouldn’t regulate planners.

So far, no opposition has emerged, according to Mr. Salmen and Marv Tuttle, the FPA’s executive director, but it could pop up in the near future.

“The legislative process is messy, money lubricates it, and we’re not the deep pockets,” Mr. Salmen said.

FPA chapters have been supportive, said Mark Johannessen, the FPA’s chairman and managing director at Harris SBSB, a unit of Sullivan Bruyette Speros & Blayney Inc.

“But we’re preaching to [the] choir” at chapter meetings, he said. “Definitely, it’s a risk” that not all planners will support regulation of the profession, Mr. Johannessen said.

“Who’s going to boss me [if planners are regulated]: the state or [a federal regulator]?” said David Barnett, a financial planner at Barnett Financial Planning, a state-registered adviser in California. He added that he is worried about the fees that planners might have to pay for regulation.

Planners who aren’t CFP certificants also may worry about being excluded from the profession, said Mr. Salmen, who is a senior vice president of GTrust Financial -Partners.

“We’ve been very clear [that] this [effort] is not setting up the CFPs as being the only people who can play in the financial planning sandbox,” he said.

Mr. Salmen also acknowledged the risk of ending up with a bill that the coalition itself couldn’t support. “Once you let the [legislative] genie out of the bottle, you have no control over it,” he said.

Travis Larson, a spokesman for the Securities Industry and Financial Markets Association, said the securities industry group wants a federally defined definition of “fiduciary” that would be “better than the current fiduciary standards” set by state common law, he said.

The FPA thinks that redefining the fiduciary standard would weaken it, Mr. Salmen said.

However, “we’ve had very good conversations with Sifma twice this year” about the fiduciary issue, he said. “They’re honest about where they’re at” from a policy perspective, Mr. Salmen said.

“The biggest challenge [Sifma has] is liability” from a fiduciary standard, he said.

Anthony Raglani, a spokesman for the Association for Advanced Life Underwriting, said that the group was aware of the coalition’s efforts but declined to comment on the matter.

When asked about Finra’s re-sponse to the coalition, spokesman Herb Perone wrote in an e-mail that Finra thinks that investment advisers must have “regular and frequent exams,” and the “same level of oversight that broker-dealer customers receive.”

A spokesman for the National Association of Insurance and Financial Advisors didn’t respond to a request for comment by press time.

E-mail Dan Jamieson at [email protected].