Options for Future Regulation of Financial Planners, Part I

Macey, Jonathan R.
June 2002
Journal of Financial Planning;Jun2002, Vol. 15 Issue 6, p92
Academic Journal
The article examines possible options for future reform of the financial planning profession in the U.S. Reform options to regulate financial planners face the difficult problem of how to define financial planning with suitable precision so as not to be over- or underinclusive. The basic definitional approaches to financial planning are functional or holding-out definitions or a combination of the two. A functional approach seeks to define carefully the range of activities that constitutes financial planning. Holding-out definitions vary from the simple to the complex holding-out definition in Canada's Multilateral Instrument 33-107. Financial planning differs from other professions in several ways. First, and foremost, there are minimal restrictions on the ability of individuals to hold themselves out as being financial planners. One possible approach that financial planners might take to achieve their regulatory objectives would involve a litigation strategy. The litigation position would be that financial planners must exercise reasonable care, prudence and diligence in the performance of their professional duties. Increased litigation would encourage development of judicially recognized standards of practice for financial planners. A second reform option would propose that legislative bodies and administrative agencies introduce stricter qualifications for investment adviser representatives, a core licensing requirement for most financial planners. As another effort to increase the qualification standards for investment advisers, states could institute minimum education or experience requirements.


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