CFP Board plans to keep fighting for more planner regulation

At least one group of financial advisers is hoping that the landmark financial-reform legislation will lead to more government oversight of the advice business.

The Certified Financial Planner Board of Standards Inc. is championing a provision in the new law that calls for the Government Accountability Office to study whether the planning industry should be more tightly regulated. The CFP Board is hoping that the study will pave the way for the creation of an oversight board that would regulate anyone claiming to be a financial planner.

“What we’re trying to impress upon people is that there is a gap in regulation,” said Robert Glovsky, president of Mintz Levin Financial Advisors LLC and chairman of the CFP Board. “The gap is that there is no oversight of the term “financial planner.’”

In about six months, the GAO will report its findings to House and Senate financial and aging committees, which then will likely hold hearings. The CFP Board intends to push for the formation of an oversight board that would report to the Securities and Exchange Commission and set standards to guide the competency and ethics of planners.

Critics, however, are worried that such a board would overstep its bounds by attempting to regulate many of the investment advisers who are already regulated by the SEC.

“We don’t see any need to take investment advisers who are already comprehensively regulated and put them under the authority of a new board,” said David Tittsworth, executive director of the Investment Adviser Association.

Robert Kurucza, a partner at Goodwin Procter LLP, said the reach of the board would have to be carefully calibrated. Financial planning incorporates a broad range of activities, including providing advice on investments, taxes, retirement, estate planning, insurance and education financing.

“What would it exclude?” Mr. Kurucza asked. “That is something the SEC would have to decide.”

Mr. Kurucza cautioned that the board’s reach shouldn’t include every investment adviser. “That would almost cause it to be dead on arrival,” he said.

The fact that people in Washington are engaged in this debate is a significant step forward for the CFP Board, which moved its headquarters from Denver to Washington in 2007.

The financial crisis soon hit, turning the attention of Congress to reforming the financial system and putting the CFP Board in the middle of the tussle.

In addition to the GAO study, the sweeping regulatory measure authorizes the SEC to impose the same fiduciary duty on broker dealers that applies to investment advisers.

The CFP Board played an instrumental role in promoting the measure as part of the Financial Planning Coalition and in partnership with other advocates, such as AARP and the Consumer Federation of America.

“I don’t think we would have worked with them as closely as we were able to had we not been here in D.C.,” Mr. Glovsky said. “We’ve been developing very strong relationships with legislators, with staff and with regulators.”

Four employees moved with the CFP Board to the capital. As it celebrated its 25th anniversary July 17, it had 62 on staff in its sleek, spacious K Street office and operated with an $18 million budget.

The organization grants the CFP certification to individuals who pass its exam and maintain continuing requirements. Currently, 61,000 planners hold the CFP mark. The total number of people who call themselves planners is estimated to range from 150,000 to 300,000.

The CFP Board argues that its imprimatur is the “standard of excellence” for the planning sector because those who receive it have met high standards for education, experience and ethics, and have passed the CFP exam, which consists of 285 questions.

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.

In an effort to elevate standards in 2007, the CFP Board voted to impose a fiduciary duty on CFP professionals.

“We were believers in the fiduciary standard long before the financial-reform effort began,” said Kevin Keller, the CFP Board’s chief executive.

The board also emphasizes policing. It employs four lawyers full time on its enforcement staff, which has 450 cases open at any given time.

Pat Huddleston, chief executive of Investor’s Watchdog and a former SEC enforcement official, praises the CFP Board for protecting consumers. In rating advisers, he takes the CFP mark into account, but he cautions that no organization can stop all nefarious financial activity.

“I tend to score that person a couple points higher because that’s a fairly rigorous program,” Mr. Huddleston said. “But I’ve seen more than one person with a CFP designation be convicted of securities fraud. It’s not foolproof.”

Perhaps the biggest challenge facing the organization is that anyone can hang out a shingle as a planner. “What you have are people who literally have no experience, no credential, calling themselves financial planners,” Mr. Glovsky said.

Ultimately, the CFP Board hopes that greater regulatory oversight will bolster consumer confidence. In the two years since the financial crisis hit, the number of people who use planners has remained steady at 28%, even though 43% said that planners have become more important as the economy has become more volatile, according to a poll the CFP Board commissioned for its anniversary

In part to shape public perception, the CFP Board is launching a re-branding effort.

“Certificants want more consumer awareness around the CFP certification,” said Tom Crowder, the CFP Board’s managing director of marketing and business development. “This is our next step to move the profession forward.”

E-mail Mark Schoeff Jr. at [email protected].

Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board)