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- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
- U.S. Securities and Exchange Commission Information This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Advisers Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.
In an interview on Tuesday, the leadership of the Financial Planning Association (FPA) discussed the group’s priorities for 2011, with Martin Kurtz, who succeeded Tom Potts as president effective Jan. 1, 2011, noting that when it comes to a fiduciary standard, it’s a “global movement.”
Investors want such a standard, Kurtz argued, citing a Financial Planning Coalition Survey in which 97% of investors agreed that, “when you receive investment advice from a financial professional, the person providing the advice should put your interests ahead of theirs and should have to tell you upfront about any fees or commissions they earn and any conflicts of interest that potentially could influence that advice,” according to the survey.
“It’s the business model that works,” and, Kurtz said, the “fiduciary standard is the FPA-CFP practice standard.” The FPA’s “thrust this year is educating members how to be fiduciary advisors. It’s not a destination—it’s a vehicle, with virtues we all believe in,” Kurtz added.
Kurtz (left) spent seven years on the Certified Financial Planner (CFP) Board of Professional Review, the disciplinary arm of the CFP Board, and chaired that board in 2005. He says that “most hearing panels were about suitability;” not whether members had met the higher fiduciary standard, but rather “Did you even fulfill the suitability” standard?
Kurtz, who is president of The Planning Center advisory firm in Moline, Ill., also worries, however, that there is a broader problem with the American consumer’s financial illiteracy, noting that “we’re not good at talking about life and money in this country.”
The mission to educate FPA members about fiduciary “best practices” and how to incorporate the fiduciary process into their firms’ practices led the FPA to team up with Don Trone, and his organization, Strategic Ethos. The FPA and Strategic Ethos will provide the Fiduciary Ethos-FPA Edition book and program to FPA members—and non-members—for a limited time, at no cost, Kurtz says. FPA members, and anyone else, for that matter, will be able to download the book at the FPA website starting March 7.
Reaching Out to FSI
Marv Tuttle (left), CEO and executive director of the largest association of planners—which currently has 23,700 members—said in the same interview that FPA is actively reaching out to members of the Financial Services Institute (FSI) to re-engage with the FPA. “The FSI has done a great job at advocacy” on behalf of the independent broker-dealers, Tuttle said, but suggested that the broker-dealer community would do well to take advantage of FPA’s expertise in practice management and in “community—we bring that to the table a little more than they do.”
Tuttle also said a priority for the FPA and its board is to determine what the
“profession’s role is in serving the needs of the 70% of Americans who get nothing” in the way of professional financial advice, arguing that if planners want to consider themselves a “profession, then you have to find a way to serve everybody,” just as the legal and medical professions do. When asked if the workplace was the right locus for providing such information, Tuttle recalled outgoing FPA President Tom Potts’s idea of having “financial chaplains” at companies who could provide a kind of pastoral financial advice to workers. However, Tuttle said that the sad fact is that “most financial planning in this country is done in auto dealers’ showrooms and in front of big-screen TVs.”
Regarding the challenges of finding younger planners to take the place of the aging advisor community, and to address the growing need for advice, Kurtz and Tuttle said part of the answer was in attracting more women to the advisor ranks, and in forming stronger links between FPA members and students majoring not just in financial planning, but also those studying insurance and finance in colleges and universities. “We’d like to see each of our 95 chapters adopt a student group” in their vicinity, said Tuttle, pointing out the success in particular of the Los Angeles student chapter of the FPA.
There are two other items of interest on the FPA's near-term agenda. The group's Major Firms Initiative has published a white paper, called Defining FInancial Planning, that proposes a definition of planning that is meant to "inform and enhance consumer expectations." FPA is seeking comment from the advisor community on the white paper through March 31. It is available for download at this portion of the FPA's site.
Finally, FPA is nearing the release this month of the latest in a series of advisor technology reports using research by ActiFi that was sponsored by TD Ameritrade and which focuses on advisors' use of portfolio management software.