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 .”
“ Our thinking is to approach this legislatively ,” Mahoney told Financial Advisor . “ But we ’ re not touching licensing , we ’ re not touching regulation , per se . This is just documenting , wherever we need to , the phrase ‘ financial planner ’ and giving it the title and protection it deserves . … I will run into [ members ] and they ’ ll say , ‘ I do everything I ’ m supposed to do . I adhere to all the ethics requirements . I adhere to good standards , I keep up to date on my competencies . … I do a good job for my clients , and that person down the street doesn ’ t do any of that and they still call themselves a financial planner . Help me protect my ability to make a living as a planner .’ This has been brewing for a long time .”
Michael Kitces , a co-founder of the XY Planning Network and a frequent FPA critic , said in a series of Twitter posts on the day of the announcement that it
Paradise Lost
WAS THE FINANCIAL PLANNING PROFESSION once poised to achieve title protection only to let it slip away ? That ’ s something perceptive observers believe .
In an interview with Financial Advisor , Michael Kitces says that the battle for the “ financial planner ” protection was actually won in 2005 — right before it was lost , ironically in one of the FPA ’ s greatest triumphs . “ In 2005 , the FPA actually got the SEC to issue title protection for ‘ financial planner ,’” he says . “ It literally existed . We had it .”
But then , he says , the FPA challenged the protection and had it vacated in its fight with the SEC over the Merrill Lynch rule , which said broker-dealers were not investment advisors but also let them offer fee-based accounts and advice without having to register with the SEC under the ’ 40 Act . In essence , the FPA had to make a trade-off to protect members , Kitces says . ( The SEC lost an FPA lawsuit when the Merrill Lynch rule was struck down by the U . S . Court of Appeals in 2007 .)
“ The FPA ultimately decided that it was worth challenging and vacating the rule of title protection to protect their members who were charging assets under management as RIAs and didn ’ t want to have to compete with broker-dealers charging assets under management without being fiduciaries ,” he says . The aftermath of that lawsuit was the birth of the hybrid movement , he says , and the FPA didn ’ t pursue title protection for 15 more years .
These were the motivations behind the XY Planning Network ’ s petitions last year to reinstate the protection that existed in 2005 . He wants the FPA to go on record supporting this petition and asks why it hasn ’ t happened .
“ The big question from everyone now is , ‘ What exactly is the game plan ?’” he asks . “ It ’ s not actually title protection unless some regulator enforces it .”
34 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER 2022 WWW . FA-MAG . COM