Saying that the financial planning profession is too important to continue to go unregulated, the Financial Planning Coalition called for legislation that would designate a national organization to oversee the industry.  

If the coalition were successful, the organization would operate under the authority of the Securities and Exchange Commission (SEC). Ideally, the legislation would call for the board to enforce the fiduciary standard of care for investment clients. The board would have the power to prevent practitioners from holding themselves out as financial planners or financial advisors if they fail to meet certain competency standards, said Marilyn Mohrman-Gillis, Managing Director of public policy for the Certified Financial Planner Board of Standards, Inc.

“There is a huge regulatory gap,” she said. “Consumers and investors are being defrauded by 300,000 people who are saying they are financial planners or financial advisors, when in fact, they are basically selling products.”

The proposed organization would go further than existing organizations, such as the Financial Planning Association or the CFP Board, to ensure that financial planning professionals do well by their clients. Although the CFP Board does perform a semi-regulatory role now for its 59,000 certified professionals, said Mohrman-Gillis, its only recourse against financial planners who fall short of its standards is to preclude those planners from using the CFP mark.

In proposing the legislation the coalition also hopes to head off any plans to appoint the Financial Industry Regulatory Authority (FINRA) as the regulatory body for financial planners. The objection there is that the FINRA is a membership organization for broker-dealers. More concerned with the sale of securities under the suitability standard of care, it tends to be antagonistic to the fiduciary standard of care, says Mohrman-Gillis.  

If Congress passes legislation to create the new organization, then that entity would have a broader range of responsibility. It could prevent certain practitioners from marketing themselves as financial planners or financial advisors unless they meet baseline standards for competency and education. They would have to passing a baseline competency exam and accumulate continuing education credits through further study, said Mohrman-Gillis.