COver stOry law on the books says , “ It shall be unlawful for any person registered under section 203 of this title to represent that he is an investment counselor to use the name ‘ investment counsel ’ as descriptive of his business unless ( 1 ) his or its principal business consists of acting as investment adviser , and ( 2 ) a substantial part of his or its business consists of rendering investment supervisory services .”
By “ investment adviser ,” the law “ means any person who , for compensation , engages in the business of advising others , either directly or through publications or writings , as to the value of securities or as to the advisability of investing in , purchasing , or selling securities , , or who , for compensation and as part of a regular business , issues or promulgates analyses or reports concerning securities … .”
Unfortunately , Thompson says , the English language is so robust that new phrases often pop up when the old ones get stale . That ’ s going to make the FPA ’ s task more daunting , he says — because if the title “ financial planning ” gets regulated like “ investment counselor ,” people in other industries might coalesce around something else that ’ s official-sounding .
The end goal is crystal clear . “ What you ’ re trying to do here is build barriers to entry ,” he says . Even if the FPA is successful in getting federal or state laws enacted that said you could only practice with the title “ financial planner ,” that still requires you to define it .
There have been various thoughts on the matter . Does it include accountants and lawyers ? The SEC released one note in 1987 that said even pension consultants and advisors to entertainers and athletes were doing work that often fell under the heading of “ investment advisor .”
In 1990 , Rick Boucher , a Virginia Democrat in the House of Representatives , tried to pass legislation that would require anyone offering investment advice to pay to register with the SEC . Boucher and other legislators sought to address the problem after millions of Americans had seen their life savings decimated by tax reform , which had eliminated tax breaks for many limited partnerships , and the savings and loan crisis . Various requirements were debated but the so-called Boucher Bill never gained traction .
In 2010 , the Dodd-Frank Act called for a study to determine the effectiveness of state and federal regulations to protect consumers from those who hold themselves out as “ financial planners ” through the use of misleading titles and designations . The Government Accountability Office heeded the call and said in a 2011 report that most of what financial planners do is already regulated — and that a specific layer of regulation just for financial planners seemed unwarranted .
Indeed , Thompson says , the only thing not regulated is somebody who does everything at once : sales , insurance advice , investment advice and estate planning . That means some financial planners end up holding three or more licenses and the field gets regulated piecemeal .
“ The Investment Advisers Act [ of 1940 ], it ’ s a little bit of a hybrid because they basically defined someone as an investment advisor if they give advice on securities for compensation as part of a going business . So that ’ s more functional . That ’ s the emphasis there because as we know well , there ’ s all kinds of titles … wealth manager , financial advisor , financial planner , investment advisor , investment counselor , you name it .”
Oh , Canada
Some professional associations are looking up north to Canada as both a model and a cautionary tale of what happens when you win title protection for financial planners .
The Financial Services Regulatory Authority of Ontario in April said it had approved FP Canada and the Institute for Advanced Financial Education as the first two credentialing bodies that could officially christen people as “ financial planners ” and “ financial advisors ” in Ontario . By making it official , the authority said it will “ make it easier for these individuals to communicate their value to consumers and validate their education and expertise ,” according to Huston Loke , the executive vice president of market conduct at FSRA , speaking in a press release .
But here ’ s where it gets bad , say CFP partisans : There are five different credentials in the Canadian version that allow you to use the title : Besides CFP , you can get over the hump with four other marks : the PFP ( the Personal Financial Planner license ), the QAFP ( the Qualified Associate Financial Planner marks ), the CLU ( the Chartered Life Underwriter mark ), or the RRC ( the Registered Retirement Consultant credential ).
Financial advisors get prickly about marks , especially those they feel are “ less than ” the certifications they deem more sophisticated . ( Ask anybody who remembers the “ CFP lite ” associate license controversy from two decades ago .) The worry is that different marks are going to be lesser marks , and the name “ financial planner ” would thus be watered down if title protection isn ’ t firmly tied down .
Convincing the planning profession to agree on a common standard is difficult enough . Persuading public authorities to buy in is yet another mountain to climb .
36 | financial advisor magazine | september 2022 www . fa-mag . com