The national chair says the first objective is not to scare small investors away

April 3, 2012 — 2:55 AM UTC by Susan John


Brooke’s note: After reading Philip Chao’s guest opinion, in response to RIABiz’ March 22 article, As DOL contemplates stiff fiduciary-related penalties on advisors, NAPFA and FPA find rare concord with FSI, Susan M. John, national chairwoman of The National Association of Personal Financial Advisors, sent us her response to his comments. We are happy to publish it here.

With all due respect to Philip Chao and his observations on NAPFA and our position on the extension of the ERISA fiduciary standard to IRA account holders, no one has seen any of the details of the re-proposal by the Department of Labor.

The fact is NAPFA led the charge for the strongest fiduciary, fee-only standard in the industry when it was established in 1983. We didn’t wait for a financial debacle to make ethics the No. 1 concern for our members’ clients. NAPFA’s stand on fiduciary rule-making based on the [Investment] Advisers Act of 1940 is unwavering; it defines our dedication to, and relationship with, the public.

Only 2% of advisors would qualify for NAPFA membership. So when we talk about standards, we come first from protecting, and providing true fiduciary advice to, the public. If no one is willing to advise the consumer of the $25K IRA, that’s a problem.

Take time to get it right

This issue is part disclosure, part compliance and a whole lot of complication. We are not saying there aren’t creative ways to solve the compensation dilemma — but the DOL must proceed very carefully so that the consumer is not suddenly left with a void of information. We will not endorse a watered-down re-proposal, and [we] urge the DOL to take the time to get it right.

As national chair of NAPFA, I passionately endorse our position as a champion for the public, no question. That’s part of who we are. We want to see a fiduciary standard that works for all, and maybe this is a time when the model of offering advice to the average investor gets changed for the better.

There are already a number of models that offer financial planning to the middle-income investor under a fee arrangement, subject to a fiduciary standard. I have to believe that creative minds out there can craft a way to offer fiduciary advice that makes sense for both the average investor and the advisor. My position is about potentially complicated compliance scaring advisors away, not the cost of providing fiduciary advice to the average investor.

Until we see what the DOL re-proposes, we are all guessing about what it will contain, but first and foremost, the consumer must be protected, and we cannot waiver away that fiduciary obligation.

Susan John, CFP®, AIF
National Chair

Mentioned in this article:

National Association of Personal Finance Advisors
Top Executive: Ellen Turf

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norman berk said:

April 3, 2012 — 3:49 PM UTC

I agree with the concept of one standard for all, the highest standard possible. However, NAPFA would do a service to the professional community by refraining their repititive chest thumping of how virtuous they are and how they are the true fee-only and fiduciary driven organization.

What is not stated in this article is how many of us choose to not join this holier than thou crusade. After all, this is the group that attempted to trademark the term fee only and to police the profession by legally preventing anyone from using the term unless NAPFA granted

Enough already.

Please spend your energy on one fiduciary standard for all, that would benefit the profession and the public.


Stephen Winks said:

April 4, 2012 — 3:03 PM UTC


There already is a “ fiducuary standard for all” based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters. Best practices determines how good we are and is the basis upon which the industry competes.

There is nothing controversial, nothing to debate, just the responsibility to act in the client’s best interest.

The SEC has established it is the responsibility of the industry to support advisors so they can safely act in the consumers best interest. This is not a question of the broker not wanting to act in their client’s best interest—it is a question of the industry providing the necessary supprting resources that makes advice safe, scalable, easy to execute and manage.

There are no accomodations or excuses for those that choose not to support their brokers to act in the client’s best interest as required by force of statute under Dodd-Frank. Pretty simple. The industry is missing in action. This is why Congress had to pass Dodd-Frank, and even then the industry still is not supporting fiduciary standing.

NAPFA is to be commended in standing on principle, but even most of their membership is supported by broker/dealers or custodians which either do not allow or support fiduciary standing.

What does it take to give the brokerage industry a kick in the pants so it is even possible for the broker to act in an expert fiduciary capacity. No one, even the industry itself, disagrees with serving the client’s best interest. It’s time to remove the impediments, so brokers can align their interests with the best interest of the consumer.

Actions speak louder than words. Despite the industry’s public position, it is still working against its brokers being required to act in the consumer’s best interest based on objective expert fiduciary criteria.


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