NAPFA Promotes Fiduciary Financial Planning

By Michael A. Watkins

The NAPFA Public Policy Committee, chaired by Dan Danford, CFP^®, is focusing its efforts on six issues. To understand these issues, it’s helpful to understand the recent history of NAPFA’s advocacy and the organizations with which it collaborates to magnify its national impact on significant public policy issues, especially issues related to the promotion of fiduciary financial planning.

A Brief History

Responding in 2008 to the global financial crisis, NAPFA collaborated with CFP Board and the Financial Planning Association^® (FPA) to launch the Financial Planning Coalition to promote the regulation and recognition of financial planning as a profession incorporating a strong fiduciary standard for personal investment advice.

Instead of creating a separate legal entity, the organizations coordinated their activities under an agreement that outlined a framework for collaboration, stated agreed-upon policy objectives, and provided a process to share resources. Through the coalition, NAPFA and NAPFA-Registered Financial Advisors played leading roles at both federal and state levels.

On the federal level, the coalition was a key contributor to DOL’s successful development and adoption of its 2016 Investment Advice Rule, also known as the Fiduciary Rule. Similarly, the coalition worked closely with other capital markets organizations to urge the SEC to include strong fiduciary standards in its 2019 Regulation Best Interest (Reg BI). On the state level, the coalition advocated for financial literacy education and supported the adoption and enforcement of regulations to protect retail investors, retirement savers, seniors, and vulnerable persons.

In 2022, the coalition disbanded, and FPA announced that title protection for financial planners would be its primary policy issue. NAPFA continues pursuing its policy objectives by participating in other coalitions and working on joint projects with CFP Board. NAPFA, CFP Board, and FPA maintain a productive dialogue and consult each other regularly on issues important to the financial planning profession.

NAPFA’s Public Policy Approach

NAPFA’s advocacy activities and policy objectives are national in scope and focus on developments likely to have a significant, nationwide impact on retail investors, retirement savers, and the financial planning profession. NAPFA has endorsed the following statement as a policy goal:

The regulation and recognition of financial planning as a separate, distinct profession based upon a robust fiduciary standard of care for retail investors that is no less stringent than under the federal Investment Advisers Act of 1940.

To develop the effective strategies necessary to achieve this policy goal and to amplify the voices of NAPFA advisors, NAPFA actively supports and participates in coalitions like the four listed below.

Advisory Fee Deductibility Group seeks to restore and expand the federal tax deduction for professional investment and financial planning advice that was repealed by the 2017 Tax Cuts and Jobs Act. Participants have included NAPFA, CFP Board, FPA, Financial Services Institute, and Investment Advisor Association (IAA).

Friends of Fiduciary (first convened during the 2009 Congressional debate on the Dodd-Frank Act) advocates for a robust fiduciary standard and enhanced investor protections. Participants have included AARP, AICPA, Better Markets, CFP Board, Consumer Federation of America, FPA, IAA, NAPFA, and the North American Securities Administrators Association (NASAA).

Professional Certification Coalition (PCC) represents over 100 certification organizations nationwide that are concerned about actions by states that might affect their ability to grant private professional certifications (e.g., “NAPFA-Registered Financial Advisor,” “Certified Financial Planner” certification, etc.). 

Tomorrow’s Workforce Coalition includes over 500 organizations supporting legislation that would permit Section 529 savings plans to pay for postsecondary training and credentialing, such as licenses and professional certifications.

Key 2023–2024 issues for NAPFA

1. Federal Fiduciary Standards
DOL has announced that it will propose a new Investment Advice Rule. The proposal is expected to address criticisms leveled against the 2016 Fiduciary Rule, which was overturned in 2018 by a federal appeals court, and to update ERISA advice standards to reflect the current retirement marketplace. This would be a significant rulemaking that, like the 2016 Fiduciary Rule, is expected to attract intense scrutiny from the financial services industry and the public.

NAPFA and Friends of Fiduciary are frequently in contact with SEC officials on a range of issues, especially the agency’s interpretation and enforcement of SEC fiduciary standards under Reg BI. In lieu of additional Reg BI rulemaking, the SEC is expected to rely on issuing interpretative guidance and filing enforcement actions.

2. Retirement Security
NAPFA’s fall 2022 meetings with members of Congress on Capitol Hill resulted in a request from Congressional offices for CFP^® professionals’ assistance to address the nation’s retirement security crisis. This is an increasingly bipartisan issue in Congress. In response to this request, NAPFA and CFP Board organized a working group of CFP^® professionals, including NAPFA-Registered Financial Advisors, to develop recommendations for new federal legislation to improve the nation’s retirement security framework.

The working group’s proposals, tentatively entitled Report on Improving the U.S. Retirement Plan System, recommend new retirement options for American workers, retirement advice to lower- and moderate-income households, and minimizing regulatory burdens on financial planners. NAPFA and CFP Board will present this report to Congress as part of a future joint Capitol Hill advocacy effort.

3. Protecting Seniors and Vulnerable Persons
Studies show that senior financial exploitation is a common form of elder abuse. NAPFA supports proposals to protect seniors, including initiatives to provide federal grants to state securities and insurance agencies to fight senior investor fraud, to create a new SEC task force on senior investors, and to fund SEC collaboration with state securities and insurance regulators to fight senior financial fraud.

4. NASAA Model Rules
NAPFA maintains an active dialogue with NASAA about regulatory developments and model state law proposals and regularly files public comment letters on NASAA proposals that may significantly affect financial planners. A key focus is to provide NASAA with advice on alternative fee models being developed and employed by financial planners.

For example, NAPFA and its partners have engaged in discussions with NASAA and filed comment letters with a state regulator about financial planner fee guidance published during 2022. The organizations have highlighted potential disparities in documentation burdens that might favor AUM advisors over advisors who use alternative fee arrangements.

5. Occupational Licensing and Professional Education Funding
Congress and state legislatures are seeking alternatives to reduce or eliminate barriers to employment based on prior criminal convictions. Through the PCC, NAPFA advocates for legislative and regulatory approaches that protect the rights of nongovernmental, private certifying organizations to issue and administer professional licenses and certifications. In addition, through the Tomorrow’s Workforce Coalition, NAPFA supports legislation that would permit Section 529 savings plans to pay for postsecondary training and credentialing, such as licenses and professional certifications.

6. SEC Investment Advisor Oversight
NAPFA monitors and comments on the SEC’s oversight of investment advisors. This includes reviewing recently proposed rules involving custody, outsourcing, digital assets (cryptocurrency), data analytics, and doing business over the internet.

Public Policy Committee Invites Your Participation

NAPFA members who are interested in promoting NAPFA’s public policy goals serve as volunteers on the NAPFA Public Policy Committee, which works closely with the NAPFA Board of Directors, CEO Kathryn Dattomo, and the organization’s consultants. The committee meets monthly to discuss developments, to provide practitioner insights on significant new rules, and to oversee steps NAPFA is taking, such as meetings with key decision-makers and filing public comment letters.

The active involvement of the Committee members ensures that the real-world experience of financial planner practitioners is reflected in NAPFA’s policy positions and advocacy. For these reasons, I encourage you to reach out to the Public Policy Committee at any time and to respond should it ask for your assistance. The Public Policy Committee and NAPFA’s policy consultants work to represent your interests.

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Michael A. Watkins is president and general counsel of Financial Markets Consultants LLC, which since 2013 has provided regulatory and policy support to NAPFA, the Financial Planning Coalition, and allied capital markets advocacy organizations. Email him at watkins@finmarcon.com.

image credit: istock.com/Douglas Rissing