Now that's what I'm talkin' about! It seems that once the FPA got its engine firing on all cylinders, it went straight into high gear. My latest exuberance over the Financial Planning Association comes from a new task force it has formed to explore the regulation of financial planning. A small step, to be sure, but one that indicates the FPA is thinking big–much bigger than anyone else in the planning community these days.
The new task force was initiated by incoming FPA president Jim Barnash: "As it was my time to drive the bus for FPA, I felt that if we're going to be more of an advocate in the public and political arena, we needed to be more proactive." Now there's a word that hasn't been in the FPA's vocabulary since, well, maybe ever.
To hear Barnash and FPA group director for advocacy Duane Thompson tell it, the task force is a followup to the suit the FPA filed against the Securities and Exchange Commission over the Merrill Lynch Rule. In its communications with the Commission, the FPA suggested a reassessment of how financial planners are regulated that would include looking at a number of alternatives, including a self-regulatory organization.
The FPA had already taken the step of commissioning an independent study of how planners are regulated, which was conducted by Cornell University law professor Jonathan Macey in 2002, and published in a white paper that is available on the FPA Web site. Barnash and others felt, however, that in the current regulatory environment in Washington, the FPA needed to develop its own position on the matter. "We need to think about what might happen," Barnash says, "and what we should be prepared to do or suggest."
The instincts of Barnash, Thompson, and the rest of the FPA board are right on. Regulatory reform is indeed in the air in Washington. The accountants and mutual fund companies have felt it, as have RIAs in the form of an ongoing series of beefed-up, even Draconian, compliance requirements. Moreover, anyone who offers advice to folks who have money in pension funds will be affected by the Department of Labor's pending fiduciary duty requirements. Are financial planners next?
The current situation under which financial planners are regulated by the SEC, the NASD, the CFP Board, state insurance and securities regulators, and now possibly DOL, was created by other people. With any luck, having planners involved in the new regs will simplify this mess.
The big question is how much muscle the FPA can bring to the fight once the bout begins in earnest. With virtually everybody in retail financial services these days trying to look as much like a financial planner as possible, Thompson, Neil Simon, and their Washington FPA colleagues have to be feeling a little like a prom queen in a biker bar: protecting their virtue from the big boys–the powerful lobbies of the brokerage firms, insurance companies, and banks–may prove to be problematic. Any legislation or reg changes that clearly establish the differences (read: advantages) of financial planners versus other "advisors" in the financial services universe will be fought all the way. "We are definitely the underdog," says Thompson.
Fortunately, the FPA won't be going into this brawl unarmed. With unexpected wisdom, the Association has expanded its mission to include a responsibility not only for its members, but for the public as well. Big deal, I hear you say: The CFP Board has been "protecting the public" for years. True. But the Board seems to believe that it needs to protect the public from financial planners, dropping the "self" from a self-regulatory organization, and creating more of an us-versus-them mentality when dealing with CFPs.
In contrast, Barnash and the FPA have become advocates for financial planning, actively emphasizing that financial planners are good for the public. "We have a two fold responsibility," says Barnash, "to our members and to the public. It's not in the public's best interest when they can't see the difference between financial planners and other kinds of advisors."
