GAO report could be first step toward regulating financial planners
In a Washington where Republicans are ascendant — taking over the House and increasing their Senate numbers to a level that ensures filibuster success — the term “regulation” is unpopular.
In a Washington where Republicans are ascendant — taking over the House and increasing their Senate numbers to a level that ensures filibuster success — the term “regulation” is unpopular.
That is, unless you’re talking about financial planning. The Certified Financial Planner Board of Standards Inc. is hoping that a Government Accountability Office study expected to be delivered to Congress tomorrow shows the need for greater oversight of the sector.
“It’s not often that an industry seeks more regulation,” Marilyn Mohrman-Gillis, managing director of public policy and communications at the CFP Board, said in a conference call with reporters last week. “We believe fundamentally that this is a consumer-protection issue.”
Under the Dodd-Frank financial reform law, the GAO was ordered conduct a study on the issue and submit a report to the Senate Banking Committee, the Senate Aging Committee and the House Financial Services Committee that assesses whether existing state and federal regulations are effective in protecting investors from “individuals who hold themselves out as financial planners through the use of misleading titles, designations or marketing materials.”
The report also will delve into whether financial planners are expected to meet “adequate ethical and professional standards.”
If the GAO says that existing regulation is lacking, the CFP Board will try to persuade Congress to authorize an oversight board that would report to the Securities and Exchange Commission and set standards to oversee the competency and ethics of planners.
At the moment, the CFP Board sets the planning sector’s standards. It grants the CFP certification to individuals who pass its exam and maintain continuing requirements. Currently, 61,000 planners hold the CFP mark. But the total number of people who call themselves planners is estimated to range from 150,000 to 300,000.
People who want to take the planner test can study in 322 registered programs that are taught in more than 200 educational institutions across the country. The curriculum prepares them for the two-day, 10-hour exam and also can lead to a degree.
Critics, however, worry that a congressionally authorized oversight body would overstep its bounds by attempting to regulate many investment advisers who are already monitored by the SEC and states.
But the CFP Board argues that regulation silos — the SEC and the states for investment advisers and the Financial Industry Regulatory Authority Inc. for broker-dealers — provide inadequate policing of the investment advice market.
“There’s no regulation of the integrated delivery of financial advice that cuts across investment, tax, insurance, education and estate planning,” Ms. Mohrman-Gillis said.
When it receives the GAO report, Congress still will be a long way from boosting financial planning regulation. The first step likely will be hearings by one or more of the committees of jurisdiction. Legislation would have to be written and work its way through a House controlled by Republicans and a Senate led by Democrats.
“It is certainly an uphill battle,” Ms. Mohrman-Gillis said.
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