By Jill Schlesinger
Tribune Content Agency
The Financial Planning Association (FPA) had its national conference recently, and it could have been presented by the F-word - that is, “fiduciary.” The weekend brought together 2,000 certified financial planners, all of whom adhere to the fiduciary standard. That standard of care requires that financial professionals put the interests of clients first.
Others who adhere to the standard are those with CFP certification from the Certified Financial Planner Board of Standards (CFP), CPA personal financial specialists and the fee-only professionals who belong to the National Association of Personal Financial Advisors (NAPFA).
The fiduciary standard might be taken for granted by consumers. Of course someone who is talking to me about my financial life should put my interest before his or his company’s interest, right? Unfortunately, that’s not how it always works.
According to a recent survey conducted by the CFP, 9 out of 10 Americans agree that anyone giving financial guidance should put the client’s interests ahead of their own and should have to tell the client up front about any conflicts of interest that could potentially influence that advice. Unfortunately, while many consumers are increasingly turning to professionals to help guide them (40 percent of respondents, up 12 percent from five years ago), many of these individuals are working with folks who are not required to put the interest of clients first.
This survey was conducted as a quiet battle is going in Washington, D.C. Earlier in the year, President Obama endorsed a Department of Labor proposal that would require all financial professionals to act in a customer’s best interest when working with retirement investors. The Securities Industry and Financial Markets Association, the lobbying arm of the financial world, declared, “This proposal would lead to a number of negative consequences for individual investors.” Several large firms that provide retirement services echo that sentiment and have submitted alternative proposals to the Labor Department.
The Financial Planning Coalition, which is comprised of the CFP Board, the FPA and NAPFA, support the fiduciary rule and note that the change “is a long overdue and much-needed update to the 40-year-old definition of ‘fiduciary’ under the Employee Retirement Income Security Act (ERISA).” The coalition dismisses alternative proposals from financial services organizations, saying that they would dilute “the basic requirements of a true fiduciary standard under either ERISA or securities law.”
Paul Auslander, former chairman of the board of directors of the FPA and director of financial planning at ProVise Management Group in Florida, told me that, considering that most consumers believe that they are receiving untainted financial advice, the rules should be updated to make that the reality.
I asked Auslander why some companies are pushing back so hard against the change. He believes they are missing a unique business opportunity. “The company that has the professional guts to be the first to plant the flag on top of the fiduciary mountain will be richly rewarded by consumers, who will flock to the early adopters of a true, legally binding client-first model,” he said. “It’s mind-boggling to me how few senior executives get this.” He added, “Doing the right thing is a differentiator, and being legally obligated to be accountable for your company’s actions is the only way to do it.”
To find a fiduciary adviser, you can use the FPA’s tool (www.plannersearch.org), or for a fee-only adviser you can go to NAPFA (findanadvisor.napfa.org).
Contact Jill Schlesinger, senior business analyst for CBS News, at askjill@JillonMoney.com.
(c) 2015 JILL SCHLESINGER
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