My friend Ron Roge, a veteran independent advisor in Bohemia, N.Y., sent an e-mail in response to my last blog on FINRA’s proposal to test RIAs. He raises an issue that’s well worth exploring. (Perhaps especially now that FSI, the independent broker-dealer organization, has officially endorsed the notion of FINRA serving as the SRO for investment advisors.) Here’s what Ron suggested:
Since we already have testing—it’s called the CFP exam—let’s not reinvent the wheel. This exam will separate the salesmen from the advisors. Those who can’t pass the CFP exam become brokers, who can only transact, not advise. They will continue to be regulated by FINRA. Those who can pass the CFP exam become advisors, who are regulated by SEC and the CFP Board of Standards.
On its face, this makes so much sense, a trait that has always been Ron’s trademark. The Board’s already doing testing, so there would be no startup costs, and it already embraces a fiduciary duty (albeit rather recently), so it would have far fewer conflicts than FINRA. Of course, the CFP Board isn’t an SRO for the brokerage industry, so at least in theory, it doesn’t have the product-pushing, sorry, I meant distribution mentality.
If these were the only issues, Ron’s would be a great suggestion. Unfortunately, it isn’t: there’s the CFP Board itself. As I mentioned, the Board only recently, and reluctantly, applied a fiduciary standard to CFPs, and it’s a fairly watered down version at that. The fact is that since its inception over 20 years ago, the Board has been all too willing to accept the use of financial planning and the CFP marks as tools for selling products, umm, distribution, rather than objective, professional financial advice.