State regulators propose continuing education for investment adviser reps
NASAA wants to close the regulatory gap between IARs and other financial advice professionals
State securities regulators want to require investment adviser representatives to complete continuing education each year, a move they say would close a regulatory gap.
The North American Securities Administrators Association released a model rule proposal Thursday to establish a continuing education program for IARs. Under the rule, IARs would have to complete 12 hours of CE annually. Half the hours would focus on products and practice and the other half on ethics and professional responsibility.
Investment adviser representatives are advisers who work for a registered investment advisory firm. They often are dually registered with a broker-dealer.
There are about 360,000 IARs registered with states, according to the NASAA proposal. Approximately 60,000 of them are registered only as IARs, while another 300,000 are also registered representatives with brokerage firm members of the Financial Industry Regulatory Authority Inc.
Although Finra imposes CE requirements on registered reps, IARs do not have to take educational courses or learn new content each year. Internal NASAA committees have been working on an IAR CE proposal for a couple of years. Under the rule, NASAA would develop criteria for courses and content as well for the selection of providers.
“Investment adviser representatives play an important role in the financial lives of millions of Americans, yet unlike most financial services professions, they are not required to meet a continuing education requirement to maintain their licenses to work with investors,” Alex Glass, Indiana securities commissioner and chair of NASAA’s investment adviser section, said in a statement. “We are proposing a program to close this education and investor-protection gap.”
The NASAA model rule proposal will be open for public comment until March 30. The initial reaction from investment advisers was positive.
Continuing education requirements exist for lawyers, accountants and doctors, so they should be put in place for IARs, too, said Ian Bloom, owner of Open World Financial Life Planning. He asserted it would help elevate the profession.
“It’s something that holds us to an even higher standard,” Mr. Bloom said. IARs “are the only professionals who don’t have to meet an annual education requirement.”
Brandon Littleton, founder and chief executive of Form Advisory Group, said IARs should embrace CE.
“I don’t see this as just another checkbox that IARs have to check to meet their regulatory requirements,” Mr. Littleton wrote in an email. “For anyone that is serious about their craft and is truly acting as a fiduciary for their clients, this proposal should excite them.”
Many investment advisers already stay abreast of market developments and changes in the advisory sector, said Thomas M. Hlohinec, chief executive of Rise Financial Partners.
“The good investment adviser representatives already educate themselves on a routine basis, so it wouldn’t be a big hassle to start this requirement,” Mr. Hlohinec said. “It would overall benefit the financial advising universe.”
In addition to Finra’s continuing education requirement, professional designations, such as the certified financial planner and chartered financial analyst credentials, have annual CE requirements. NASAA would approve Finra continuing education that meets certain criteria. Professional CE would be evaluated the same way that NASAA reviews other providers and content, according to the model rule.
“I’m hopeful if an IAR is also a CFP and already operating in a fiduciary capacity that the CFP and NASAA folks would consider some form of reciprocal CE,” Dennis Nolte, vice president of Seacoast Investment Services, wrote in an email. “It’s already 30 hours every two years for CFP CE. If you’re an IAR within a financial/banking institution, there is also CE, as there is within the insurance industry.”
The more financial professionals who must take CE, the better, said Allen Katz, president of Comprehensive Wealth Management Group. It would level the playing field among different parts of the advice profession.
“There should be commensurate amounts of CE,” Mr. Katz said.
Learn more about reprints and licensing for this article.
