The largest brokerages, investment banks and asset managers are calling on the CFP Board to pull back on any rules for planners that go beyond the standards of FINRA and the SEC.
Continuing "regulatory creep" at the CFP Board over nearly two decades toward tougher fiduciary standards and enforcement as part of a "self-created and expanding role as a
de facto, private regulator" opens the firms to undue risks and hinders consumer protections, according to their trade association, the Securities Industry and Financial Markets Association. The organization released a white paper last week, in the latest example of the financial giants' criticism of the guidelines for the planning profession's most respected and popular certification.
SIFMA
The SIFMA white paper urged the CFP Board to provide the firms with safe harbor against any "standards that duplicate, conflict with, and/or impose obligations" on top of FINRA and Securities and Exchange Commission rules.
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"In assuming and expanding its regulatory function, CFP Board has increasingly exposed CFP certificants' firms to significant regulatory, compliance, supervisory, reputational and third-party risks, even though these firms have no formal relationship with CFP Board," the report said. "CFP Board's regulatory intervention also undermines the SEC's and FINRA's ability to perform their own regulatory functions, and in certain cases, it undermines investor protection. SIFMA and its members are committed to addressing and ameliorating these significant risks, inefficiencies and complications. We look forward to working constructively and collaboratively with CFP Board, as well as the SEC and FINRA, to develop long-term workable solutions that benefit and serve all affected parties."
The CFP Board is reviewing its recommendations and "will consider SIFMA's input as we have with all public comments on our ethics documents, including
"As an organization committed to competency and ethical standards for financial planners, CFP Board is not a regulator," Feese said. "More than 100,000 CFP certificants make a voluntary commitment to CFP Board to adhere to our Code of Ethics and Standards of Conduct. Both the public and CFP professionals expect high standards. CFP certification enhances client trust and advisor credibility, and firms gain a competitive edge by employing CFP professionals. CFP Board remains dedicated to upholding a process that ensures CFP certification as the standard for competent and ethical financial planning."
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For many planners, though, SIFMA's qualms reflect how the designation must straddle all of the industry's channels among advisors who range from fee-only, solo practitioners as small business owners to dually-registered employees of multinational wealth management companies. Some, like Knut Rostad, the president of the nonprofit
"Through history, sharp differences between business and professional interests abound. SIFMA opposing CFP Board's mission to raise standards as a matter of policy is not news," Rostad said in an email. "SIFMA worries about CFPs creating 'risks' for the firms that employ them by seeking to adhere to a higher professional standard. The greatest risk is for firms that are brokers; not indy RIAs who let the best advisors be their best. Again, not much news here. Finally, a factor that is news here and relevant to SIFMA's alleged concerns is that CFP Board acknowledges that it cannot really enforce the standard It has set."
Rostad pointed to
"The government has strong enforcement capability but
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The SIFMA member firms — which
At least a half dozen times since 2007, SIFMA has submitted comments to the CFP Board in opposition as
Alongside those shifts in the rules, the investigation and
Besides the "safe harbor" against any rules that differ from FINRA and SEC standards, SIFMA recommended that the CFP Board alter its information-request procedures for investigations and provide much more notice to the firm employing CFPs ahead of those reviews and any public disclosure.
"There are also steps that the SEC and/or FINRA could take to provide relief for firms that employ or associate with CFP certificants and that are thereby subject to a range of regulatory, compliance, supervisory, reputational and third-party risks as a result of CFP Board's regulatory activities," the white paper said. "The first step is to take notice of and formally recognize the risks and adverse consequences that result from the privately-run CFP Board acting as a de facto, adjunct regulator, operating entirely outside the purview of the SEC/FINRA regulatory regime."
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While SIFMA and industry trade groups will be eyeing an easier regulatory environment for their current practices under President-elect Trump, it's not clear whether that will carry over into any impact on a professional certification organization whose ranks are expanding every year.
The CFP Board "will inevitably encounter challenges in upholding its standards among an ever-widening base of certificants – made more complicated by the fact that, as a non-regulatory authority, its ability to enforce its standards is essentially limited to being able to prevent someone from using the CFP marks if they violate the standards," according to an executive summary of Moisand's