From Dodd-Frank to new taxes on professional services, lawmakers are increasingly making and suggesting changes that could dramatically impact planners and their clients. The planning community hasn't sat idle amid all this rule-making. In fact, the Financial Planning Association and its regional chapters have gotten more politically active than they've been in the past.
Across the country, several statewide FPA groups representing multiple chapters have sprung up to tackle pressing state legislative and regulatory issues. In Washington, the FPA has stepped outside its normal comfort zone of opining solely on federal policies affecting planners - this summer, it commented on Congress' debt ceiling debate. The national trade group may also weigh in on upcoming proposals to reduce the federal deficit.
The FPA is no longer content for planners to remain on the outside looking in. FPA President-elect Paul Auslander is urging members nationwide to consider running for office and bring their broader, client-centered financial viewpoint to statehouses and Congress.
The intent of these latest political initiatives is to get lawmakers and regulators to distinguish planners from other financial services professionals who might have different agendas specifically related to their particular products and services, says the FPA's Daniel J. Barry, managing director of government relations and public policy. "Planners put their clients first, so we advocate from that perspective," Barry says. "Planners can also help give a better perspective because they are often licensed and regulated in multiple ways by multiple regulators, so we bring a perspective to financial service issues that somebody who is more isolated can't do."
FPA chapters in New York and California are following the lead of their counterparts in Florida and forming statewide organizations to strengthen members' advocacy efforts in their respective state capitols. The goal is to get ahead of legislative issues such as the threat of new sales taxes on professional services, including financial planning, a tax Michigan lawmakers repealed in 2009 after FPA and other industry groups protested aggressively. The statewide entities are also proactively trying to establish relationships with the state regulators who are set to take over supervision of many planners from the SEC next summer, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
"These are all issues that are happening, but we could not be effective in any of them if we dealt with them in isolated chapters," says David Mendels, leader of the recently formed FPA Council of New York. "But if we can speak with one voice at the state level for 2,000 members, then that's a different story." Mendels is also director of planning for Creative Financial Concepts and president of FPA's New York City chapter.
The various chapters within New York chose to join forces informally for statewide advocacy efforts, and the group's local leaders are now periodically connecting on conference calls to discuss their plan of action, he says. The first initiative was to collectively meet with state legislative leaders in Albany to introduce themselves and the nature of the trade group.
FIRST STEP: CREDIBILITY
"It is much better if we first establish relationships so that we have credibility going in, rather than when issues arise, trying to establish credibility afterward," Mendels says. There are no pending legislative issues pertaining to planners in New York, but Mendels says the new council is watching for initiatives to spread from other states, such as Michigan's ill-fated sales tax on professional services, or from the federal level, such as consumer protection regulations.
"Quite frankly, we're more consumer friendly than some of the other financial entities," such as lobbyists for groups that represent banks, investment firms or insurance companies, he contends. "We might very well have a lot of input if things on the consumer protection front start happening in New York."
FPA of Florida is a more formal political group, a cooperative of all nine state chapters created in 2007 both to advocate in Tallahassee and to conduct statewide educational conferences for its members, says Auslander, a director-at-large. Kimberly Overman, president of the Financial Well in Tampa, is the current president of FPA of Florida.
The statewide cooperative was instrumental in helping to develop last year's Safeguard Our Seniors Act, a bipartisan bill that strengthened Florida's investor fraud laws. The new law increases the penalty for the willful act of "twisting" or "churning" of an annuity to a maximum of $75,000. FPA of Florida also strongly advocated for the law to include a provision that gives the Florida Department of Financial Services the power to revoke an insurance agent's license if the agent has had their securities license revoked, Auslander says.
In California, the state's 14 chapters are in the process of forming a statewide organization that is expected to be up and running by early 2012, says Evelyn Zohlen, who is leading the statewide initiative. Zohlen is also president of Inspired Financial in Huntington Beach, Calif., and chairwoman of FPA of Orange County.
Zohlen and other California planners aren't waiting to take action. They're already reaching out to some state leaders, including Preston DuFauchard, commissioner of the California Department of Corporations and Jerry Twomey, the deputy commissioner.
By next June, investment advisors with assets under management between $25 million and $100 million are required to transition to state registration from SEC, per Dodd-Frank. Zohlen says FPA members want to be "part of the solution in this transition."
"Some technical things have to happen, but it can happen in a smooth loving 'Kumbaya' kind of way, or a militant 'Get on it now' kind of way," Zohlen says. "Our members want to have a friendly face standing at that window to help them through this transition process."
Planners say the efforts to reach out to California state officials have paid off - they have asked FPA members to email them questions regarding the transition. The agency will select questions to include on a Frequently Asked Questions page on its website, Zohlen says. "This also shows the department that we can be team players, which will help give us a voice at the table when it comes to regulatory decisions that have to be made," she says.
On the federal level, the FPA's board thought it was prudent for the trade group to step outside of its normal lobbying efforts and speak out on the broader debt ceiling debate that was roiling Congress this summer, Barry says. In a July statement, the group said it had "called on Congress and the president to protect America's bond rating and raise the debt ceiling."
"Defaulting on our financial obligations would jeopardize economic growth," FPA Executive Director and Chief Executive Marv Tuttle wrote in the statement. "But Congress and the president should take serious and substantial steps now to address our nation's grave fiscal imbalance. No financial planner would advise a client with a debt problem to get a larger line of credit without having a commitment and a plan to address the underlying problem."
Barry says the group's intent is not to be "politically charged" on one side or the other. "It's more about bringing our perspective to macroeconomic issues and public policy," he says. "We heard from a lot of our members that they were concerned about not raising the debt ceiling, but at the same time they were also really concerned about the expansion of federal debt over the last several years. We wanted to be on the record saying to Congress, 'You've got to take care of both of those problems.' "
For now, the group is watching to see what proposals come out of the Joint Select Committee on Deficit Reduction. The so-called super-committee is charged with finding ways to reduce the deficit by $1.2 trillion by Nov. 23 for an up-or-down vote in Congress by Dec. 23.
If the committee fails, that automatically triggers $1.2 trillion in spending cuts. FPA is considering whether to take a formal stand, depending on the progress of the super-committee's deliberations - or if it's apparent that Congress might be headed for another impasse, Barry says.
The trade group is also now urging its members to get even further involved in political decision-making by considering running for office, Auslander says. "In the legislatures today there are bankers, insurance executives, lawyers and yet there is little or no representation in Congress or in statehouses with anyone with financial planning training - at a time when people are fundamentally worried about their own financial future and about the general economy," he says. "The time has come for us to get more involved. We would be excellent public servants."
Katie Kuehner-Hebert is a San Diego freelancer who writes for Financial Planning, American Banker, Risk & Insurance and Advertising Age.