Planner, adviser coalition seeks new regulator, but not Finra

The Financial Planning Coalition confirmed today that it is promoting a new regulatory board that would come under the jurisdiction of the Securities and Exchange Commission and would regulate anyone who offered any type of financial planning services.

The Financial Planning Coalition confirmed today that it is promoting a new regulatory board that would come under the jurisdiction of the Securities and Exchange Commission and would regulate anyone who offered any type of financial planning services.

The association of industry groups is recommended that Congress establish a professional board (InvestmentNewsApril 26) — akin to those that regulate physicians, attorneys and accountants — that would operate through the Certified Financial Planner Board of Standards Inc.

The coalition, made up of the Denver-based Financial Planning Association, the Washington-based CFP Board and the National Association of Professional Financial Advisors of Arlington Heights, Ill., will regulate individuals — not firms — by setting standards of ethics, leaders of the group said today at a teleconference for the press.

The proposed board would have enforcement powers delegated to it by Congress through the SEC.

At the same time, leaders of the coalition said it would be unrealistic to propose that the estimated 300,000 people who hold themselves out as financial planners be forced to pass the same rigorous tests that the CFP Board imposes on those who are licensed as certified planners.

They also said that they hope to exclude from the proposed regime investment advisers who do not offer planning services but are already regulated by the SEC.

They said it is too early to detail what standards planners would be obligated to meet.

The coalition said it has not hired lobbyists or law firms to draft proposals but has held meetings with regulators and politicians regarding the need to adopt a high fiduciary standard for planners and hope to involve them in their lobbying efforts.

With these proposals, the coalition is attempting to achieve two ends: to legitimize financial planning as a regulated industry while at the same time heading off regulation by the Financial Industry Regulatory Authority Inc. of New York and Washington, which oversees securities brokers and is very rules-oriented, they said.

“Finra should not have any part of this board, because it is an organization focused on its members and operated for the benefit of its constituents,” said Richard Salmen, president of the FPA and senior advisor with GTrust Financial Partners in Topeka, Kan.

He and other coalition leaders also said Finra is ill-suited to oversee the high fiduciary standard of care they want imposed on planners, because the association focuses on a customer suitability standard of care related to sales of products.

“We believe Finra is not a strong consumer advocate and Finra’s record for using rulemaking authority is mixed at best,” said Marilyn Capelli Dimitroff, chairwoman of the CFP Board of Directors.

“We recognize that although similar in many ways, there are some differences between services provided by investment advisers and broker-dealers,” Finra said in a statement.

“What is needed is the development of a system that is tailored to fit the investment advisers, which includes rulebook and governance.”

A Finra spokesman said the coalition’s effort to describe it as “a member organization” run for the benefit of brokers and their firms is highly inaccurate.

“If you are doing a securities business in the United States, you are required under federal statute to register with Finra and to subject yourself to its regulations and disciplinary regime,” the spokesman said.