NAPFA Chair Bill Baldwin and Chair-Elect Susan John: The Weekend Interview

As the reform bill passes, the fee-only group still advocates Act of 1940 fiduciary standard

With financial reform at the forefront in Washington, D.C., and the issue of ethics a hot topic among advisors, the National Association of Personal Financial Advisors (NAPFA) at its annual meeting in May elected a new chairperson. NAPFA is an advocate of the fiduciary standards as laid out in the Investment Advisors Act of 1940--and it's something the fee-only group started doing long before Congress took up the fiduciary issue in its current session.

NAPFA tapped Susan John, a certified financial planner and president of Financial Focus Inc. of Wolfeboro, New Hampshire, as its new leader at the annual meeting in Chicago. John will take over the chairperson's post for 2010-11 starting September 1, replacing William Baldwin, the 2009-10 chairperson.

Another New Englander, Bill Baldwin is president of Pillar Financial Advisors in Waltham, Massachusetts. A financial planner for over 25 years, Baldwin co-founded Pillar in 1986. He holds degrees in accounting, law, and taxation, and counsels clients on financial planning issues such as asset allocation, investing, estate planning, and tax strategies.

John became a CFP in 1989 and joined NAPFA a year later. She currently chairs the group's industry issues committee, which formulates positions for the organization. John's key issues include continued advocacy of the Act of 1940 and collaboration with NAPFA's partners in the Coalition for Financial Planning.

During a press tour in New York on Thursday, July 15, John and Baldwin met with Advisor Media Group associate editor Joyce Hanson for breakfast--just hours before the financial reform bill passed in Washington--to talk about the transition of NAPFA's leadership and its focus over the next year now that financial reform has become a reality in Congress.

Q: Tell me about NAPFA's membership. Is membership growing?

Baldwin: NAPFA's membership includes 1,400 fee-only, registered financial advisors. Overall, we have 2,300 members, including corporate firms, industry affiliates, and student and academic memberships. Membership did grow in the double digits for a number of years, but it has actually tapered off in the last couple of years. It tracks the troubles in the markets, but it's still positive growth. Our membership this year is approximately 100 members larger than the year before. We're happy to be growing at a small level. With a small membership, new members are attracted one by one through other members.

Q: And now you're transitioning to a new chair.

Baldwin: Little transition is needed. Susan has been a member since long before I was. She and her business partner at that time introduced me to the organization in the 1990s. She has served on the national board previous to this, and now she has served another three years on the board. She has a lot of corporate memory, more so than me. She knows and understands the organization and its objectives and the goings-on with the office staff in Chicago.

Q: It sounds like you're ready to hit the ground running, Susan. What do you see as being NAPFA's focus during your upcoming 2010-11 tenure?

John: We've been actively involved with the Coalition group in helping to frame the new regulation and advancing the profession of financial planning. [Editor's Note: NAPFA is one of three groups in the Coalition for Financial Planning along with the Certified Financial Planner Board of Standards and the Financial Planning Association.] A lot of what we'll focus on in the next year will be as a result of whatever legislation and rules fall out of that. We may have to make some big changes in the way we serve our members depending upon what those rules and regulations happen to be.

Q: What do you anticipate those changes to be?

John: What we'd really like to see out of this regulatory change is clarity, clarity for the public and clarity between advisors as to who is really adhering to a fiduciary standard and who is truly representing the interests of their clients and those who are selling products. We're afraid, though, that we're going to have more obfuscation than clarity as a result of this, and that the fiduciary standard may be somewhat watered down from the 1940 Act standard that we adhere to today, which is a bright-line standard that reQuires that you put the client's interests first at all times. In the next year we're going to focus on what continues to make our organization relevant as we move forward.

Q: What do you mean by "relevant"?

John: For a long time, we have been the fee-only fiduciary organization. So in a world where everybody is a fiduciary, how do we distinguish ourselves?

Q: What's your position on the financial reform bill's moving of regulation of advisors with up to $100 million in assets to the states?

John: I think that's a necessary thing for the SEC. They have way too much on their plate, and $100 million for an advisor is a nice sum of money, but it's not that much money to be managing. We think it's appropriate.

Q: Any last thoughts?

John: We really would like the 1940 Act's fiduciary standard to be the standard by which all providers of investment advice are bound. In that regard, we are participating with the Committee for the Fiduciary Standard and Boston University Law School on a call for papers on the fiduciary standard as part of a submission to the SEC. We hope to have an event in Washington in October as a presentation of those papers.

Q: What has your experience been so far with Washington's reception of NAPFA's message?

John: We were well received in visiting the congressional delegates as part of the Coalition's efforts. Everybody was really interested in the fiduciary standard, and we're happy we're getting a study.

Baldwin: The process of lobbying in Congress was interesting because we don't have a lot of money. We have a lot of information and ideas. The fact that financial planners are unregulated and that anybody can call themselves a financial planner is something that Congress members and senators were unaware of. They didn't know the issue existed, so it was something out of wholly new cloth for them. We have visited and lobbied with everyone in the House Financial Services Committee and the Senate Banking Committee. Every one of their offices has been educated and briefed on the issue. There's an awareness now that once did not exist. Just that by itself should, over time, help bring about change and frame opinions.

Read a story about NAPFA's election of two new board members from the archives of InvestmentAdvisor.com.

Read more about the financial reform bill: marketplace winners and losers; impact on advisors, broker/dealers, and banks; the fiduciary standard for brokers; and the history of financial reform

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