More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The CFP Board of Standards leadership provided an update to its public awareness campaign, released a survey of its certificants and affirmed its support for a uniform fiduciary standard for all advice givers on Friday during the FPA Experience 2011 conference in San Diego.
Marilyn Mohrman-Gillis (left), who heads CFP Board’s public policy efforts, spoke forcefully against the argument presented by some broker-dealer and insurance associations that extending a fiduciary standard to all providers of financial advice to individuals would reduce investor choice, and hurt in particular the middle class. The idea that extending the fiduciary standard would reduce choice, she said, “is baloney.” That argument, which she said comes primarily from the insurance industry, is “completely fallacious,” though she admitted that the argument “has legs” in Washington. The argument is also misleading, she said, since an exended fiduciary standard wouldn’t preclude broker-dealers and their representatives from receiving commissions or even selling proprietary products. Board CEO Kevin Keller pointed out that many of the larger broker-dealers have already found a way to incorporate a fiduciary standard into their operations.
While some have argued that the SEC should conduct a cost benefit analysis (CBA) of extending the fiduciary standard, Mohrman-Gillis said that while the SEC should conduct such an analysis, “there’s plenty in the record already to support a rulemaking” by the SEC on the standard. And while the recent court ruling voiding the SEC's proxy access rule was based on the failure of the Commission to conduct a CBA on that rule, she pointed to the irony of Rep. Spencer Bachus' draft bill calling for an SRO for advisors, which itself does not include a requirement for a CBA on establishing an advisor SRO.
As for the prospects of a self-regulatory organization for advisors, Mohrman-Gillis said that the Board and its partners in the Financial Planning Coalition (the FPA and NAPFA) are “firmly in the camp that setting up a whole new bureaucracy is not the solution. The SEC is the proper regulator” for advisors, but the Commission must be funded adequately, she said, to meet its responsibilities. “An advisor SRO concept is not necessary,” she concluded, pointing out that the proposed SRO would oversee state-regulated advisors, which would have a “huge impact on our profession.”
When asked about the future of the Coalition and whether it had been successful, Keller pointed out that two-and-a-half years ago, “the three largest planning organizations barely talked to each other;
At the media roundtable, Tom Crowder, the Board’s director of marketing and business development, provided an update on its public awareness campaign, which has used print advertisements in national publications such as The Wall Street Journal, Barron’s, Money, SmartMoney and Kiplinger’s designed to drive consumers to the website LetsMakeAPlan.org. The site, Crowder said, has been enhanced to allow visitors to search geographically for CFPs. In October, he said, the campaign will be expanded to National Public Radio, with spots appearing on such programs as Morning Edition and All Things Considered. The campaign is being funded by increased fees levied on participants.
CEO Keller reported the results of a July-August survey of CFP certificants, which yielded the news that 86% of respondents in the telephone survey reported ‘high’ satisfaction with their career choice. Similar high scores were produced when the respondents were asked if they believed financial planning should be a recognized and regulated profession (88%) and that a fiduciary standard of care is appropriate for all investment advice givers to retail investors (88%).