May 2, 2012

FPA Leaders Talk About Diversity, Fiduciary Rules

FPA tackling issues of succession planning and practice management ‘maybe later than we should have’

Marv Tuttle, FPA executive director and CEO, speaking at an FPA conference in 2010. Marv Tuttle, FPA executive director and CEO, speaking at an FPA conference in 2010.

In a recent wide-ranging interview with AdvisorOne, two of the top executives at the Financial Planning Association (FPA), Marv Tuttle, executive director and CEO, and Paul Auslander, FPA’s president, talked about the top issues facing advisors.

They focused on the SEC’s attempts to put brokers under a fiduciary mandate, the aging of the profession and its lack of diversity, the importance of practice management and succession planning, as well as how the younger generation of planners hold the key to moving the industry forward.

Regarding whether the Securities and Exchange Commission’s attempts to write a fiduciary rule will eventually be unveiled, Auslander says he’s confident that the train has “already left the station;” now “it’s just how it applies.” SEC Chairwoman Mary Schapiro has said she is hopeful the SEC can release a fiduciary duty proposal this year.

Says Auslander: the debate now is “how [a fiduciary duty for advice givers] is going to be applied—and there are many different iterations.”

A fiduciary duty “for all business models is the big challenge, but I think we can get it right,” Auslander said. “At the end of the day, [serving in a fiduciary capacity] is compensation neutral. You can be a fiduciary if you’re a commission broker or a fee-only planner. All forms of the profession have a potential for conflict.”

Both Auslander and Tuttle agreed that two pressing issues for the industry are practice management and succession planning. The FPA, Tuttle said, is putting “a greater focus on practice management, from A to Z” as well as how succession planning plays into that. Tuttle said an area where FPA “can excel” is in practice and business management. “That’s where we’re spending a lot of time to put some shape to being a go-to resource for financial planners and maybe others that can benefit from a professional standards standpoint.”

Auslander lamented the fact that FPA is “tackling these issues of succession planning and practice management within our association maybe later than we should have.”

While the advisory industry as a whole is still unprepared to hand their practices to a successor, “there are a few cases where some folks have really thought it through,” Tuttle said, “but that’s the exception rather than the rule.”

Tuttle conceded, too, that the industry is still in the early stages of “examining and seeing where we can make a difference in the diversity of those who practice financial planning and those who are receiving financial planning.”

The industry is still predominantly made up of white males—with only 23% of FPA’s members being women. “If we want to be seen as a profession, we have to figure out how to deliver this [financial planning] benefit to various segments of society,” Tuttle said. The ratio of male and female financial planning practitioners needs to be closer to “50-50.”

Auslander added that while more women are entering the industry in the U.S., Japan and China have the U.S. beat in that “most of their planners and CFPs are women.”

With the average age of FPA members being 56, Tuttle also noted the importance the younger generation plays in shaping the profession. “The younger generation is the one that is going to make financial planning stick,” he said.

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