Financial Planning Coalition Zeroes In On Fiduciary Standard While A Key Consumer Group Shifts To Support Non-SEC Regulation For RIAs

Tuesday, July 12, 2011 23:24
Financial Planning Coalition Zeroes In On Fiduciary Standard While A Key Consumer Group Shifts To Support Non-SEC Regulation For RIAs

Just when the big financial planning groups seem to be getting some traction promoting the fiduciary label, other organizations are busy lobbying for big changes in the way fiduciaries are regulated.

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The Financial Planning Coalition -- made up of NAPFA, the FPA and the CFP Board -- has issued a statement applauding the Senate Banking Committee for considering the issue of whether all self-proclaimed "investment advisors" should be held to a fiduciary standard.


As they say, "most investors assume their financial services providers are required to provide investment advice that is in their best interest. Unfortunately, this is not always the case. Investment advisors are required by law to put their clients' interests first, but other financial services providers do not have to live up to that high standard when providing advice."


In other words, according to the Coalition, non-fiduciary advisors are riding on the goodwill that fiduciary advisors have created around the job title "advisor," without having to do the work to maintain it.


Dodd-Frank gave the SEC the power to apply the duty to everyone claiming the title or distributing what could be considered investment advice.


Fair enough, but the far more heavily funded and wirehouse-dominated Securities Industry & Financial Markets Association (SIFMA) is lobbying hard to stall the process of putting Dodd-Frank into action -- and that includes making fiduciary rules apply universally. 


As CEO Timothy Ryan recently told Bloomberg, "we just want to see it done responsibly, reasonably, and, if they need more time, quite frankly we'd rather they take more time."


One area of regulation Ryan seems happy to see change: the SEC as separate regulator for larger RIAs.


"We have too many regulatory agencies," he says. "We know that."


And influential advocacy group the Consumer Federation of America sees the transfer of RIA oversight to a self-regulatory organization like FINRA as a done deal.


In her testimony to the Senate Banking Committee, the CFA's investment protection chief Barbara Roper continued her support for a universal fiduciary standard, but concedes that she now agrees with SIFMA where it comes to taking RIAs away from the SEC.


It's a simple question of realism for her, not ideology.


"Having spent the better part of two decades arguing for various approaches to increase SEC resources for investor advisor oversight with nothing to show for our efforts, we have been forced to reassess our opposition to the SRO approach," she says.


As far as she's concerned, the right SRO would be better than what retail investors have to deal with now, which is an SEC so overloaded that smaller advisors can go decades between exams. 




Comments (2)

For Consumer Federation of America to change its position to support naming FINRA the SRO of RIAs is surprising.

Though CFA's Barbara Roper seems like a one-man watchdog agency, she has tirelessly tracked financial regulation issues and advocated for consumers since at least the mid-1980s.

Roper's is often called upon to testify before Congress on these issues and CFA has a voice on these issues.

Roper's change of heart leaves the Financial Planning Coalition somewhat isolated.

The three organizations comprising the Financial Planning Coalition--CFP Board, and National Association of Personal Financial Advisors--all position themselves as advocates for consumers.

For any one of these three to be in opposition to Consumer Federation of America on a consumer issue is rare and awkward.

Yet that is exactly what's happened. The Financial Planning Coalition wants the SEC to be the regulator of RIAs under new reform rules, while CFA supports FINRA becoming the the self-regulatory organization.

The lineup of organizations backing FINRA-administered SRO already included influential groups like SIFMA and CFA Institute as well as FSI, which represents independent BDs and their registered reps.

With CFA on their side, it's just one more reason to expect FINRA to become the SRO for RIAs.

RIAs would be wise to begin considering the implications to their positioning in the market.

agluck , July 13, 2011
Andy - I just don't see it. How can there be an SRO? FINRA is made up of broker-dealers, so it would be an ORO (others regulating organization) for advisors. Would FINRA allow my firm equal standing with BofAMerrill?

How could the dually registered rep at LPL with his/her own RIA be properly supervised? He/She would 'own' one regulator and fall under the bd, LPL for other stuff.

First we need to tackle a fiduciary definition, which is easy, just follow ERISA. Then it needs to be decided can a rep be dually registered.

brentb843 , July 13, 2011

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