US planners on path to regulation

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The Obama Administration is moving to regulate the American financial planning industry, which is currently unregulated, by increasing standards of transparency and accountability for providers of financial advice.

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The President’s proposal for 21^st Century Financial Regulatory Reform calls for several initiatives designed to protect the interests of consumers, including rewriting standards for broker-dealers when providing investment advice, raising the current standard and aligning it with the fiduciary standard currently in place for registered investment advisers who provide advice.

“We strongly believe all financial intermediaries who provide financial advice must be held to a bona fide fiduciary standard that places the consumer’s interest first,” said Diahann Lassus, chair of the National Association of Personal Financial Advisors.

“We believe that functional regulation of financial planning, which is currently unregulated, would fill a critical regulatory gap and improve the financial health of Americans.”

FPA (USA) president Richard Salmen agrees, saying he would also like to see a tightening of the standards of competency needed to provide financial advice to consumers.

“A fiduciary standard for those registered as investment advisers or broker-dealers who provide financial advice does nothing to identify the baseline levels of training, examination or experience required to provide competent financial advice.

“Many individuals not registered as investment advisers or broker-dealers provide, or claim to provide, financial advice to the public without having met essential training or ethical requirements, often leading to narrowly focused advice based on product solutions instead of objective advice focused on the client’s long-term financial goals.”

In regulating the US financial planning industry, the US Government expects to address the systemic risks in the current structure of financial institutions, systems and processes, thereby avoiding future situations like that which helped create the current economic crisis.