Planners claim small victory in financial-reform legislation

GAO planning study would bring recognition on Hill, they say

May 30, 2010 @ 12:01 am

By Mark Schoeff Jr.

A small provision buried in both the House and Senate versions of financial-reform legislation is being hailed by some as a modest but important step for the financial planning industry.

That provision calls for the Government Accountability Office, the investigative arm of Congress, to conduct a study on the oversight of financial planning. Although many planning advocates are pushing for regulation of their profession, the call for a study — and recognition on Capitol Hill that would go with it — is viewed by many as a step in the right direction.

“The financial planning study being in the bill was a victory of sorts,” said Dan Barry, director of government relations for the Financial Planning Association.

“These things happen in drips; there's an education process,” he said. “We've made substantial progress.”

Members of a House-Senate conference committee are expected to spend a couple of weeks next month negotiating several significant differences between each chamber's version of the most comprehensive overhaul of financial regulations since the Great Depression.

Within six months of enactment of the financial-reform bill, which congressional leaders want to send to President Barack Obama by July 4, the GAO is expected to report its findings to Congress, “including recommendations for the appropriate regulation of, or standards for, financial planners as a profession and how such regulations or standards should be established,” the House bill states.


The more detailed Senate legislation calls on the GAO to determine whether state and federal regulations “provide adequate ethical and professional standards for financial planners,” and to look into “the use of the title financial planner and misleading designations in connection with [the] sale of financial products, including insurance and securities.”

The Senate measure also lays out the “appropriate scope” of consumer protection regulations, including “the need to establish competency standards, practice standards, ethical guidelines, disciplinary authority and transparency to consumers.”

Sen. Herb Kohl, D-Wis., the leading proponent of the study in the Senate, initially wanted to put a provision in the financial-reform bill that would have required anyone who purports to be a financial adviser to obtain a license from an oversight board operating under the auspices of the Securities and Exchange Commission.

But in an increasingly popular legislative move, the call for a study prevailed.

A similar situation occurred with fiduciary standards.

The House bill directs the SEC to write a regulation imposing on broker-dealers and insurance agents the same standard of care for retail clients that investment advisers must meet. The Senate bill calls for an SEC study prior to rulemaking.

Fiduciary advocates decry the Senate provision as a way to kill a universal fiduciary standard, and hope that the House provision will prevail. Largely the same groups are pushing for greater regulation of the financial planning industry.

Delaying rulemaking on financial planning until after the GAO study isn't being decried as a stall tactic or as a way to kill planning legislation. Barbara Roper, director of investor protection at the Consumer Federation of America, said that the GAO study of financial planning can't be directly compared with the SEC study of fiduciary standards.

The SEC has been studying fiduciary standards for decades, and Congress has held hearings on the topic.

“It's an issue with a long history,” Ms. Roper said. “There isn't the same kind of record [on financial planning]. This is a case where a study is the appropriate next step.”


Indeed, “the study is an important first step in closing the significant gap in the regulation of financial planners,” said Marilyn Mohrman-Gillis, managing director of public policy and communications at the Certified Financial Planner Board of Standards Inc.

Her organization is one of several that have formed the Financial Planning Coalition to enhance the industry's lobbying efforts. The alliance also includes the Financial Planning Association and the National Association of Personal Financial Advisors.

On issues related to fiduciary standards and financial planning regulation, the coalition is battling the broker-dealer and insurance industries — both of which are well-armed with supple and effective lobbying operations.

Even so, the FPA over the past couple of years has redoubled its effort to make its presence felt in Washington.

“The activity has ramped up considerably since the financial crisis,” Mr. Barry said.

The group is amplifying its voice through its political action committee, which it calls “the only registered PAC on Capitol Hill re-presenting the interests of the financial planning profession.”

The PAC fund, stocked with contributions from FPA members, is small by Washington standards at $150,000. It allows FPA to make contributions to political campaigns.

Members of Congress — and those in the lobbying community — maintain that a vote can't be bought through a donation.

It does, however, make getting a meeting with a congressman or senator easier.

“Up until recently, we've been apolitical,” said Marv Tuttle, chief executive of the FPA.

“We have an opportunity to make a difference with our message,” he said. “That's why a PAC comes in handy — it gets you through the door.”

Insurance carriers and broker-dealers also are trying to enter the same portal, and they have more money to put behind the effort. For instance, the National Association of Insurance and Financial Advisors so far this year has spent $315,000 on lobbying, according to the Center for Responsive Politics.

Last year, NAIFA's lobbying total was about $1.2 million.

One broker-dealer, Edward Jones, has spent $90,000 on lobbying this year.

The Financial Planning Coalition has spent $50,000 so far this year.

Its lobbying totaled $120,000 last year.

The financial disadvantage is an obstacle to explaining financial planning to members of Congress, many of whom lack an understanding of the industry.

“This was an eye-opener over the last 18 months as we went to Capitol Hill to tell our story,” Mr. Tuttle said.

“We kind of have an identity crisis,” he said. “The No. 1 challenge is that we're the new kids on the block.”

E-mail Mark Schoeff Jr. at


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 11


Fall Excell—Peak Advisor Alliance

The InvestmentNews Research team will present exclusive data and highlights from its bellwether benchmarking study that will identify best practices for setting and structuring compensation and benefits packages throughout your organization.... Learn more

Featured video

Consuelo Mack WealthTrack

Thomas Russo: What it really takes to be a successful investor

Being a successful investor requires the ability to say no and the capacity to suffer, according to Thomas Russo, managing member of Gardner Russo & Gardner.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print