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FPA to Pursue Legal Recognition of 'Financial Planner'

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What You Need to Know

  • Legal recognition of the term financial planner would be through title protection.
  • Kitces says it would take a regulator to license the term.
  • FPA has made title protection a top advocacy goal.

The Financial Planning Association said Thursday that it plans to launch a multi-year effort to ensure the legal protection of the term “financial planner” through title protection.

“The legal recognition of the term ‘financial planner’ through title protection is an acknowledgment that anyone proclaiming to be a financial planner meets minimum standards that protect consumers and advance the financial planning profession,” 2022 FPA President Dennis Moore said in a statement.

While the topic has been around for years and has been explored by the FPA Board of Directors and the FPA Public Policy Council, FPA’s Board of Directors took on the task as they considered the future of the association’s advocacy efforts and stakeholder input, including recent research that showed 78% of FPA Members support title protection.

FPA said that if federal and/or state policymakers “continue to leave ‘financial planner’ undefined, some will take liberties with the title — even if they are not providing financial planning services.”

Also, title protection will establish minimum standards for financial planners without creating an unnecessary regulatory burden for those meeting the standards, the FPA said.

As it stands now, “there are no minimum standards for competency and ethics for those professing to be financial planners. Some credentialing bodies have their own prescribed standards, but policymakers have established nothing at the state or federal level. Our work in the months ahead, charting our course and identifying the minimum standards for anyone calling themselves a financial planner, will be critical to this endeavor.”

Michael Kitces Weighs In

Popular blogger and planner Michael Kitces reacted to the FPA’s announcement on twitter, stating: Notably, FPA isn’t staking ground to pursue title protection with the Securities and Exchange Commission …”at least, not yet(?).”

Instead, he pointed out, the group will prioritize title protection on its advocacy agenda and explore “viable state or Federal paths,” with the goal of avoiding an unnecessary regulatory burden.

“However,” he continued, “in the end “title protection” almost inevitably requires some regulator to license the term (so those not eligible are restricted from using it), and some regulator to enforce it (so standards & their regulatory burden are inevitable). Some regulation is ‘inevitable’?”

Kitces tweeted that the “Real work comes next for FPA, deciding how to operationalize this advocacy goal into real tactics – state or Federal, CFP marks or broader, etc. But applaud FPA for taking up the issue. It’s been a lonely fight, & financial planners all have to align to make it happen!”