Financial planning groups band together, brace for change

By Bob Margolis

NEW YORK (Reuters) - A trio of U.S. financial planning organizations is forging an alliance, joining the list of industry groups hoping to influence what likely will be tighter governmental oversight of the financial services sector.

The question is whether the three groups, historically at odds with each other, will be able to bury the hatchet long enough to influence an expected massive overhaul of financial regulation by Democrats in Congress and the White House.

Financial planning is not regulated as a stand-alone profession. Instead, it is monitored indirectly through licenses held by investment advisers, securities brokers and insurance producers or consultants.

"Currently, the regulation of people who give investment advice at any level is dysfunctional and disjointed," said Diahann Lassuf, national chairwoman of the National Association of Personal Financial Advisors (NAPFA) in an interview.

"The industry is not good about having a blanket standard of care for the investor or consumer," she said. "We want to be part of that conversation and not have to simply react."

U.S. President-elect Barack Obama said earlier this month that he would put strong financial regulation at the center of his economic recovery program, the latest sign of a looming crackdown expected to focus on regulatory failures behind the worst U.S. economic crisis in decades.

Just in the past week, the alleged $50 billion Ponzi scheme by well-connected Wall Street trader Bernard Madoff has raised further accusations that regulators in the Bush administration were asleep at the switch.

Leaders from Lassuf's organization, the Financial Planning Association (FPA) and the Certified Financial Planner Board of Standards Inc (CFP) met at FPA headquarters in Washington on December 3.

But some industry observers are skeptical that the groups -- each with a distinct philosophy about how the financial advice business should be regulated -- will be able to set aside their differences long enough to influence how the new administration views financial planning.

'BITTER ENEMIES'

NAPFA believes that advisers should be compensated only through fees, which are paid out independently of performance, while the FPA embraces advisers' accepting commissions, which, the group thinks can lead to conflict of interest problems.

Nobody expects that finding common ground among these groups will be easy.

"Can fee-only planners and commission brokers exist on the same side of the field when for so long they have been at each other's throats?," said Louis Harvey, president of Dalbar Inc., a Boston-based financial services market research firm.

The CFP Board, for example, has had a few minor skirmishes with NAPFA in recent years over the former's code of ethics that requires those with CFP accreditation to act on a fee-only basis when doing financial planning. NAPFA wanted that standard applied to all CFPs at all times.

Representatives of the three acknowledge that seeing blanket regulation in addition to finding common ground will not be easy.