P. Potts posted an interesting comment to my last blog, about the prospect of the CFP Board as the regulator of RIAs. At the risk of sounding like Senator John Kerry, he or she agreed with me, but I don’t agree with him or her—at least not completely.

Potts raises the important question of whether the discipline of an investment advisor is separate and distinct from that of a financial planner. Certainly, if you base your analysis on the current regulatory system, you’d be hard pressed not to come to that conclusion. But I believe that both that view and the current regulatory structure are mistaken, as is the CFP Board for buying into it.

It seems to me that the motivation behind the broker/advisory portion of the Dodd-Frank reregulation (Section 913, for those who are keeping score), is to end consumer confusion caused by the various laws and agencies that oversee “financial advisors.” Our current system separates financial advisors into different camps: brokers, insurance agents, investment advisors, and financial planners. Yet, while each of these were once separate disciplines, today their activities overlap to such as degree as to look very much one profession: financial advisors.

Why the change? Because that’s what financial consumers want. From a consumer’s perspective, personal finance today is a complex and dangerous mess with which they need help. Most consumers with some experience at the hands of the financial services industry realize they need help—competent help from someone on their side of table. Thanks to the financial services marketing machine, many people think that’s what they’re currently getting, when in most cases they aren’t.

Except when we’re talking about people who are so wealthy it doesn’t matter whether their finances are unified or not, I think it’s safe to say that the vast majority of today’s consumers need to have their finances integrated into some sort of a financial plan: When resources are limited, choices need to be made, and the best decisions are made by looking at the whole financial picture.

So most people don’t want or need an investment advisor, and an insurance agent and a broker to execute their trades. They don’t even need a financial planner, if all they do is a financial plan.

They need a financial advisor, who will start with their financial plan (their needs and goals), and who will help them get whatever financial products and services their plan requires. They need a professional financial advisor. Which means we need a profession of financial advice.  That profession could have been financial planning, but with the CFP Board’s myopic view of the responsibilities of CFPs, I don’t see that happening. FINRA with its baggage is out of the question.

I hope that the SEC’s redefinition of the responsibilities of all securities advisors will create the basis of just such a profession. It’s the best chance I’ve seen in 26 years.

Happy New Year.