There is a major fight going on between planners and regulators about how to define and apply a fiduciary standard, and some would say it is a fight that will shape how all of us practice in the future. Yet despite the high stakes, it seems that few planning professionals have chosen to join in and make their opinions known.

We still have little clarity around whether a fiduciary standard will be applied for all who provide investment advice. We are in the dark as to whether SEC Chairwoman Mary Schapiro will succeed in her goal of handing off RIA regulation to some a regulatory organization from the SEC. We don't know what portions of the Dodd-Frank Act will be put into practice and what the associated fallout may be.

And perhaps most frightening, we continue to have the dark shadow of FINRA lurking in the background with its endless posturing to become the one and only regulator within our industry. For those who embrace full disclosure and putting the client's interest first, the specter of FINRA becoming your regulator should inspire terror.

For years, our firm has been touting the advantage of working with a true fiduciary. What happens to the RIA profession if this clear distinction is watered down into being meaningless? Being regulated by a group that has routinely put the interest of its large broker-dealer members above that of the public would be an enormous step backward for our profession.

Why are so few paying attention? Perhaps they've been lulled into indifference given how long it takes to get anything accomplished in Washington. While the RIA community recognizes that a true fiduciary standard is what clients want, the debate has been dragging on and on. Section 913 of Dodd-Frank gives the SEC authority to create a new fiduciary standard of care for broker-dealers, but Schapiro seems either unwilling or unable to take action.

Don't fall asleep. We should all be paying close attention when the best-case scenario appears to be paying significant "user fees" for the right to have the SEC come into our offices significantly more often. Or consider the worst-case scenario of FINRA becoming our default regulator. If you believe the Boston Consulting Group's analysis of the costs of increased advisor oversight, you could be paying upward of tens of thousands of dollars per year to FINRA depending on your firm's assets under management. Ask yourself how this would affect the financial viability of your practice.

What can you do? In a word - fight. You have to get involved and make your voice heard. Like it or not, the punches are already being thrown, and we cannot just stand idly by.


John K. Ritter, CFP, is the public policy chairman of the national board of NAPFA. He is also co-owner of Ritter Daniher Financial Advisory in Cincinnati.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access