When arguing that financial advisors should join lawyers and doctors in having professional credentials with legal protections, the new head of the Financial Planning Association is fond of quoting one of the founding fathers of the planning industry.
James Lee, who became president of the FPA’s board of directors in January, is particularly drawn to wealth management guru Dick Wagner’s prediction that financial planning would become “the most important authentic profession of the 21st century.” Wagner, a lawyer-turned-advisor who died in 2017, used those words in his 2016 book “Financial Planning 3.0,” which argues that financial planners deserve the same sort of professional standing now accorded to lawyers, doctors, certified public accountants and engineers.
Lee said one of his goals for the FPA — an advocacy group with more than 19,000 members — is to move Wagner’s ideas toward becoming reality. The FPA’s proposal for doing just that is called “title protection.” It became an official policy priority last July. If adopted as law, either at the state or federal level, title protection would mean that only advisors who have met certain testing and educational standards can hold themselves out to the investing public as financial planners.
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Previous surveys conducted by the FPA suggested that roughly 80% of the group’s members support the initiative. Lee and his colleagues are now trying to build further momentum for the plan through surveys, town–hall meetings and other discussions with industry stakeholders.
“Historically, the three great professions are medicine, law and theology,” Lee said. “That’s because of their importance to society; medicine for the preservation of the body, law for the preservation of society and theology for the preservation of the spirit. And I believe that financial planning can become that fourth great profession because of the impact it can ultimately have on society, in improving the financial well-being of individuals.”
The FPA’s membership primarily consists of certified financial planners — advisors who have met the competency and ethical thresholds set by the independent Certified Financial Planner Board of Standards. Also included are estate-planning lawyers, accountants, insurance agents and anyone else who supports planners’ work. (The CFP Board has declined to support the FPA’s push for title protection, partly out of concern that it would have to cede control over its standards.)
Lee, a certified financial planner who has run Saratoga Springs, New York-based Lee Investment Management since 1998, recently sat down with Financial Planning to talk about his plans for title protection. The following interview has been edited for clarity and brevity.
Financial Planning: Why the push for title protection now?
Lee: There are no currently universally accepted standards to call oneself a financial planner. So anyone can call themselves a financial planner without meeting any competency and ethical standards whatsoever. Many consumers are seeking out financial planners, but they are confused because they don’t know whom they can trust. There is some confusion because people are calling themselves “financial planners” but aren’t actually delivering financial advice or maybe don’t have the competency to do so. That does create a situation where many Americans don’t trust financial service providers.
Now, you can’t call yourself a doctor, can’t call yourself a lawyer, can’t call yourself a CPA without having achieved certain competency and ethical standards. We believe financial planners should have that same sort of clarity in the marketplace. That would provide clarity to consumers, to practitioners, to regulators and to society as a whole on who could hold themselves out as financial planners.
Financial Planning: With title protection, do you think there would still be people providing various types of financial advice without officially becoming professional financial planners?
Lee: Right. Again, though, if we are successful in achieving title protection, a consumer would be able to seek someone who has met those standards before they engage with one. Right now, there is no certainty.
Financial Planning: Would the competency and ethical standards you’re envisioning for professional financial planners essentially mirror the requirements now set by the Certified Financial Planner Board of Standards?
Lee: Our policy position is that the CFP certification, and the standards it represents, constitute the foundation of the financial planning profession. At the same time, we are engaging in a process and leading a conversation with all members of the financial planning ecosystem to determine what those thresholds of competency and ethical standards should be. Ultimately, we want to form a consensus among as many members of the financial planning ecosystem as possible to create universally accepted standards.
Financial Planning: When you say clients have a hard time distinguishing between qualified and unqualified advisors, is that an implicit criticism of the CFP Board’s efforts to make certified planners the industry’s standard bearers in the public mind?
Lee: In my personal opinion — to my knowledge the FPA has not studied this issue — the CFP Board has been successful at moving the needle and informing and educating the public on the benefits of working with a CFP professional. At the same time, until there are universally accepted standards for calling oneself a financial planner, there will be confusion in the marketplace among consumers, among practitioners and among the regulators. The delivery of the benefits of financial planning will be accelerated once title protection is in place.
Financial Planning: How much time do you plan to spend gauging members’ opinions on the title protection proposal?
Lee: We are going to be engaging with all stakeholders in the financial planning ecosystem throughout the first half of the year and then determine our next steps after that. We actually started having these conversations last year with our members.
Financial Planning: Have you consulted lawyers about what legislative language for title protection might look like?
Lee: Our public policy counsel is an attorney and obviously we rely on that expertise. But again, we are very early in the process any draft legislation won’t be determined until many months, or even years, down the road.
Financial Planning: Do you foresee pursuing title protection at the federal level, or in individual states?
Lee: I think federal regulation would be preferable because many of our members work across state lines. So having a uniform standard is ideal. The reality, however, is that almost all other professions are regulated at the state level. So we have to weigh those types of issues as we determine our next steps. That’s why we are interested in hearing from stakeholders on how they feel about issues like this, so we can try to build a consensus not only on what the standards should be but also who our regulators should be as well.