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Failure to Resonate

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My sources tell me that despite their considerable efforts, the “Coalition” of the FPA, NAPFA, and the CFP Board haven’t had much of an impact on the Washington regulators and legislators who are working on the reregulation of financial advice.

Part of this failure to resonate stems from what one might call proposals that are so far out of the realm of possibility (at least in Washington’s groupthink) that not only are they not taken seriously, but the people making those proposals lose mega-credibility. Consider that what’s being discussed here is the reregulation of FINRA’s roughly 700,000 registered reps plus another 15,000 or so RIAS, into one “harmonized” group of fiduciary advisors. The notion that this hoard of stockbrokers could be corralled and harnessed by the CFP Board–which barely overseas some 50,000 financial planners with any degree of competence, and I’m being charitable here–is, well, laughable. Hence the problem.

Or at least that’s part of the problem. I suspect much of the real difficulty stems from the financial planning community’s failure to spell out just what a “financial planner” really is, and how what they do relates to other advisors already in the Washington lexicon such as brokers and RIAs.

For instance, do financial planners have the CFP designation? Well, some do and some don’t (the former B/D division of the FPA contained firms with some 110,000 registered reps. There are 50,000 CFPs. You do the math). Are financial planners RIAs? Well, some are. Are they registered reps? Well, some are. Do financial planners charge fees or commissions? Well, one or the other, or both, usually. Are they fiduciaries? Well, some are, but many aren’t. Okay, okay, but do all financial planners offer comprehensive financial planning? Hmmm. Well, that’s a good question, depending on how you define comprehensive…

Beginning to see the problem here? Due to the lack of standardization in the financial planning “profession,” no one (including the Coalition) can say with any credibility just what a financial planner is, or what they stand for. To make matters worse, from the inside-the-Beltway perspective, financial planners are an amorphous mass of not-very-big-producers who fragmentedly fall under the purview of FINRA, the SEC, or the individual state regulators.

So when the Coalition blows into Washington and starts harping about representing “financial planners,” it’s no surprise that they haven’t made much of an impact.

They’d have a better chance if they represented the Dixie Chicks–at least everyone would know what they stood for.