The Financial Planning Association (FPA) announced that it will lead a multiyear advocacy effort to get legal recognition for the term “financial planner.” This organization is a top membership and trade association for certified financial planners (CFPs) and others engaged in the financial planning process. And it says that getting this title protection will protect consumers and elevate the financial planning industry. Let’s take a look at why the FPA is taking this step and what it could mean for consumers and advisors.
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Why the FPA Wants Title Protection for Financial Planners
The FPA announced that it will launch a multiyear advocacy effort to get legal recognition for the term “financial planner.” The organization says that getting title protection will acknowledge that anyone claiming to be a financial planner meets minimum standards to protect consumers and advance the financial planning profession.
Right now, financial advisors working in relevant roles must be in compliance with the Securities and Exchange Commission (SEC), which regulates securities markets and protects investors, as well as the Financial Industry Regulatory Authority (FINRA), which writes and enforces rules for registered brokers and firms in the U.S.
Keeping these obligations in mind, the FPA is seeking title protection to prevent individuals and companies from using the term “financial planner” when they are not licensed and don’t offer any of those services.
“Financial planning is a true and noble profession that must require practitioners to achieve and maintain standards for competency and ethics,” said FPA President Dennis Moore in a statement. “The legal recognition of the term ‘financial planner’ through title protection is an acknowledgment that anyone proclaiming to be a financial planner meets minimum standards that protect consumers and advance the financial planning profession.”
What “Financial Planner” Title Protection Could Mean for Advisors
The FPA believes that the process of getting legal protection for financial planners will take years. But the organization says that it is setting the groundwork to achieve this goal for three main reasons that could affect financial advisors:
Create a distinctive presence. According to the organization, the “title protection of ‘financial planner’ will distinguish financial planners from other financial service providers. If federal and/or state policymakers continue to leave ‘financial planner’ undefined, some will take liberties with the title – even if they are not providing financial planning services.”
Less burden on qualified financial planners. The FPA says that the protection will create minimum standards for financial planners without creating unnecessary stress for those meeting the standards competently and ethically.
Legal recognition as a financial planner. The FPA believes financial planning hasn’t achieved the same level of recognition in the workforce that other professions such as law, medicine and accounting have reached. Title protection for financial planners gives a greater level of credibility to the profession.
How Clients Could Benefit From ‘Financial Planner’ Title Protection
Currently, the term “financial planner” is used in many ways to describe and promote different types of financial services. And this can make it difficult for consumers to distinguish between qualified and unqualified financial professionals.
In the event that title protection for financial planners is obtained, the FPA says that it will make it clearer for clients to identify and engage with qualified professionals.
“Consumers engaging a financial planner for comprehensive financial planning services must be able to trust that their financial health is the focus of the relationship,” Moore said.
The FPA points out that currently there are no minimum standards for competency and ethics for financial planners. And while the organization acknowledges that there are some prescribed standards by credentialing bodies, policymakers have not established anything yet at the state or federal levels.
“Like physical and mental health, financial health is paramount to everyone’s well-being,” Moore concluded.
Bottom Line
The FPA is seeking title protection for financial planners to both protect consumers and elevate the industry so that there is a greater level of credibility. This would prevent those who are unlicensed and do not offer qualified financial services from using the term. When you decide to work with a financial professional, make sure they are qualified and check their credentials.
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