CFP Board opposes state regulation of financial planning process

'Interstate profession' should be overseen at federal level, chairman says

Sep 24, 2018 @ 12:01 am

By Mark Schoeff Jr.

The Certified Financial Planner Board of Standards Inc. announced Monday that it opposes state regulation of planners.

The organization is staking out its position to try to preempt potential bills from percolating in statehouses as most legislatures come back into session early next year.

Although some states recently approved bills to reform credentialing that could put new restrictions on using the CFP mark, there is no specific legislation to regulate the process of financial planning — and CFP Board wants to keep it that way.

CFP Board chairman Richard Salmen asserted that state regulation would be costly and burdensome for CFPs, who often have clients spread across many states.

"Financial planning has developed as a very interstate profession rather than an intrastate profession, like being a doctor or lawyer," said Mr. Salmen, president of Family Investment Center. "I've got clients in 20-some states, and most financial planners do. A patchwork of legislation around the country that's not the same — we just don't see that as the right way to regulate this new profession of financial planning."

A 2017 survey conducted on the board's behalf showed that only 13% of CFPs favored state regulation, he said.

Scott Bishop, executive vice president of STA Wealth Management, is among the CFPs who resist state oversight. Depending on the size and configuration of the advisory firm, some CFPs could have to answer to the Securities and Exchange Commission, the Financial Industry Regulatory Authority Inc. and state regulators.

Complying with three different sets of rules would drain resources at a time when CFPs are under pressure to deliver more services for less money.

"Increasing the regulatory burden and reducing fees makes it more difficult for financial planners to be profitable," Mr. Bishop said.

He also favors SEC examinations over audits by state regulators. "The SEC regulators typically understand the business better," he said.

Although the CFP Board opposes state oversight, it welcomes federal regulation as a way to bolster the sector. The organization advocated for a Government Accountability Office study of financial planning that was mandated in the Dodd-Frank financial reform law.

That study did not lead to legislation authorizing federal oversight, and there's no discernable interest on Capitol Hill in such a measure.

That leaves the CFP Board — which sets and enforces the educational, experience and ethical requirements for the approximately 82,000 CFPs in the United States — as the only player on the planning playing field.

Earlier this year, it approved strengthening the fiduciary duty attached to the credential.

"The best thing we can do for the profession as CFP Board right now is simply implement our new standards effectively," Mr. Salmen said. "Our job is to make sure that those who are holding these marks live up to that promise to their clients and the public."


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