Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Wednesday, July 21, 2010

A Step in the Right Direction

We wrote in our recent blog article “New Financial Regulations Off the Mark”, that we question the value of the new financial regulations law. Yet, all was not bad. In particular, it included a provision to regulate financial advisors and a provision to examine the benefits of requiring that stock brokers be held to a fiduciary standard in their dealings with clients.

We discussed what it means to be a fiduciary in our May 18th blog titled “Is Your Advisor a Fiduciary?”. We said:

“A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. If your financial advisor is acting as a fiduciary, he is acting in your best interest. If he or she is acting in a fiduciary capacity as your advisor, he (she) will clearly disclose all means of compensation and any potential conflicts of interest.”

The Financial Planning Coalition, has energetically promoted the above two provisions. The Financial Planning Coalition is comprised of Certified Financial Planner Board of Standards (CFP Board), the Financial Planning Association® (FPA®), and the National Association of Personal Financial Advisors (NAPFA), which are independent organizations that promote high ethical standards and modes of conduct among their respective stakeholders while also providing outreach to consumers in a variety of methods.

Due to a great extent to the efforts of the Coalition, the new law has addressed the above two issues. As stated in an e-mail to us from the Coalition, the new financial regulation law (Dodd-Frank):

“gives the Securities and Exchange Commission (SEC) authority to require brokers, when providing personalized investment advice about securities to retail customers, to act in the best interest of the customer. The SEC will be able to exercise its rulemaking authority after it completes a six-month study to evaluate the effectiveness of existing legal or regulatory standards of care for broker-dealers and investment advisers for providing personalized investment advice. The study will also look at any legal or regulatory gaps, shortcomings, or overlaps in the standards of care for broker-dealers and investment advisers.”

Currently, anyone can use the title of “financial planner” or “financial advisor”. As Certified Financial Planner™ licensees and members of the Financial Planning Association® (FPA®), we are held to the fiduciary standard. We strongly support the regulation of all “financial advisors” and the requirement that they all be held to a fiduciary standard.


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