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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
Mentioned in this article:
National Association of Personal Finance Advisors
Top Executive: Ellen Turf
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