More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Bob Clark's October column, "The Dog That Didn't Bark," provides an inaccurate and misleading review of the Financial Planning Coalition's goals for reregulation of the financial services industry. As a result, the column is a dog that's barking up the wrong tree.
It is true that the Coalition represents financial planners. The Coalition also recognizes that the call for wholesale regulatory reform in financial services provides an historic opportunity to revise our outdated financial regulatory system and demand more protection for consumers.
Indeed, the Coalition's Statement of Understanding--released in January, not July--sets forth objectives the Coalition wants to see Congress enact as part of financial services reform, including:
o Recognizing and regulating financial planning as a profession;
o Establishing baseline standards of competency and enforcing a fiduciary standard of care for the delivery of financial planning services; and
o Enabling the public to easily identify qualified and ethical financial planners who are subject to professional standards.
The Coalition has time and again stated its belief that anyone who provides financial advice must be held to a fiduciary standard of care.
In its June 18 response to the President's proposal, the Financial Planning Coalition went on record as saying: "We strongly believe all financial intermediaries who provide financial advice must be held to a bona fide fiduciary standard that places the consumer's interest first."
Indeed, the Coalition's July 17 testimony before the House Committee on Financial Services states flatly: "...we were very happy to see the President propose that broker-dealers who provide investment advice be held to the same fiduciary standard as investment advisers. We are pleased that this Committee is considering the proposal and hope it results in an unambiguous fiduciary duty for all financial professionals who provide investment advice and does not undermine the fiduciary duty that already exists under the Investment Advisers Act of 1940."
We firmly believe that the proposal's recognition that providers of financial advice must be held to a fiduciary standard is an important development that will have lasting benefits for American consumers. A bona fide fiduciary duty is a key component of the Coalition's proposal for a national oversight board for planners.
Criticizing the Coalition for pursuing goals in addition to the now popular goal of having a fiduciary duty applied to all who provide financial advice is disingenuous at best. Such criticism also ignores the reality of today's financial services regulation. Over the decades, the regulatory regime has developed along two separate tracks: laws governing the sale of financial products and laws governing investment advice. When the delivery of financial services involves a combination of product sales and financial advice, this dual structure results in confusion, conflicts of interest and gaps in oversight. The gap is most glaring when it involves the delivery of broad-based financial advice--or financial planning--to the public.
It is this gap that we want to eliminate, because consumers have no easy way to differentiate among estimated 300,000 financial agents who refer to themselves, through a host of titles, as financial advisers.
The Coalition has been unambiguous in its support of a bona fide fiduciary standard for all providers of financial advice, and the Coalition will continue to raise issues and propose solutions to issues affecting the financial planning profession and the public it serves.
Managing Director, Public Policy
CFP Board of Standards, Inc.
Director, Government Relations
Special Projects Manager