Today, anyone can call themselves a financial planner. The Financial Planning Association would like to change that.
The FPA, a trade organization with more than 19,000 members, has embarked on an effort to secure legal recognition of the term “financial planner.” The move would establish guidelines under yet-to-be determined criteria for who can call themselves a financial planner.
The FPA says title protection would help consumers make sense of what is now a bewildering marketplace for financial advice, populated by brokers, advisors, wealth managers, retirement specialists, and more. While many details regarding title protection are still to be determined, it could put financial planners on a level similar to that of two other high-profile professions: lawyers and doctors.
To learn more about the FPA’s progress, Barron’s Advisor caught up with FPA CEO Patrick Mahoney and FPA President-elect James Lee at the association’s annual conference in Seattle.
Why pursue title protection?
Lee: We believe that everyone can benefit from engaging with a financial planner. But there are not universally accepted standards for being a financial planner. So consumers don’t have a way of easily identifying who is competent.
If title protection is successful, there will be clarity for professionals, investors, and regulators as to who is a competent financial planner. That will ultimately deliver good financial planning to more people in society.
My vision is that everyone will engage with a financial planner just as they engage with a doctor. If we can create this distinct profession of financial planning, consumers will be engaging with their financial planner to make sure they are on track to reach all their goals and if any issues come up during the year, they can contact their planner just as they do with their doctor. How much better would society be if they engaged with a competent financial planner all throughout their lives? But today, many people aren’t engaging with a financial planner because they don’t know who to trust.
Mahoney: We’ve had multiple surveys over a number of years showing people want to protect their title as a financial planner.
We meet a lot of people at our chapters and the conversation goes something like this: “I do everything I am supposed to do as a planner. I conduct myself with integrity. I stay on top of my competencies and continuing education. I view myself as part of an important profession. But the person down the street does 10% of what I do. What are you doing to protect my ability to run my practice?”
So we view it as our responsibility to lead on this. And it’s been well received among our members.
James, you’ve spoken here at the conference about financial planning being the next noble profession. Can you explain what you mean by that?
Lee: I ask people to imagine a mountain range. There are peaks and each represents an established profession. Three peaks are taller than the rest: medicine, law and theology. Historically, they’ve been recognized as important because of their positive impact on society. We believe that there is another peak that is only coming into view, and that’s financial planning. We believe that it will be one of the four great professions.
Leading practitioners, firms, academics, professional associations, and the CFP Board have formed an important foundation. But title protection will help us get there by forming universally accepted standards.
Will title protection be done at the state or federal level?
Mahoney: To be determined. We’ve committed to a monthslong process of listening. We are going to go out and meet with our members, firms, and others. We’ll take all that in and distill it. Then it will be clear if it should be done at the regulatory level or the congressional level [or elsewhere]. Our commitment is that by the time we are done, no one will be able to complain that they were not listened to. We are going to wait and talk to all the folks we need to talk to. Patience is our operating word.
Why not just make the certified financial planner designation the standard?
Lee: We believe the CFP designation is the foundation. But we understand that others may have a different perspective.
What are your next steps?
Starting next month, we will begin a nationwide conversation. We’ve identified multiple constituencies and tracks. We will talk to large firms. Small firms. Credential providers. Everyone in the ecosystem. This will take several months. It may take us into the fall. Process is important. We have to bring it in, distill it, and present that to the board and we’ll have discussions about what the next steps should be. We want to be thoughtful about it.
Have you gotten feedback already?
Lee: Absolutely. Our most important constituency is our members. We have a group of members, representatives from each chapter, who convene and provide recommendations to the FPA board. We’ve already had a discussion about title protection. So the listening has started. But all the other constituencies will be listened to as well.
We’re going to do regional meetings. We have 78 chapters across the country. We owe it to our members to blanket our coverage.
Our advisory council gives us candid feedback and good advice. So far the theme has been appreciation that they are being included. And that goes a long way to establishing credibility.
Earlier this year, the FPA got involved in lobbying against a proposed tax on financial planning in Kentucky. Why?
Mahoney: We have an advocacy team that monitors legislation across the country. This popped up in February. Around the same time FSI [the Financial Services Institute] contacted us about it too. We saw this as a threat to our members in Kentucky. The issue was the government was looking to remove the state income tax, but they were going to replace that with fees, including a fee on financial planning service. We and the political action committee partnered together and hired a lobbyist in the state capital. This was very local. We worked to get that language out. And ultimately the legislature stripped out that language. We won. So today, financial planners are immune to additional levies on their fees. That was important to our members in Kentucky.
From a strategic perspective, we were worried about the contagion effect. If this happened in Kentucky, would it spread to other states? Hopefully it won’t get picked up in other states.
But for me, it really reinforced our role of advocating for our members in a tangible way. It had an immediate effect. As with title protection, we’re trying to do two things at the same time: elevate the profession and advocate for financial planners.
Lee: Advocacy is one of the primary values and propositions that FPA provides to members. We welcome members to get more active with advocating for their own interests, for their fellow members, and the profession. They can get involved at the local and federal level. We hold advocacy days in many states and in Washington, D.C.
I live in New York state. For many years, I’ve participated in the New York state advocacy day. It’s a great way to explain to legislators what financial planners do for their clients, how we are different from others in the financial services industry, and to build relationships with policymakers who can have an impact on our profession.
How does it feel to be back in person at FPA’s annual conference?
Lee: I’m inspired by my fellow financial planners. I’m hearing a lot of stories about how they are impacting their clients’ lives. It makes me very optimistic about financial planners and the future of the profession.
Mahoney: There was a yearning to be in person again. There is a real desire to grow and learn. If I as a financial planner had a problem with a client, and I could talk to someone like James who’s been doing it for a long time, he might say, ‘Here’s how I would handle it.’ You can’t get that kind of dialogue online.
Thanks James and Patrick.
Editor’s note: This interview was edited for length and clarity.