Will 2023 Finally Deliver Fiduciary Clarity? CFPs Not Getting Hopes Up

“The legislative and regulatory changes that have occurred in this industry have been tremendous, and I got a close-up look at the process over the years in my role on the FPA board,” Schweiss says. “A lot of the advocacy work we were doing while I was on the FPA board was pushing for higher standards, and we achieved that in some key ways.”

Despite some progress, both Schweiss and Mallaney emphasized the desire to see a brighter and more discernable line drawn between the brokerage and advisor sides of the industry. They say this is especially important as more consumers seek out what they expect to be “holistic financial planning services” in the years ahead.

Where Policy Meets Practice

“My personal philosophy is that, if you are going to hold yourself out there and call yourself a financial planner, you should have to hold certain credentials and a conflict-free, loyal way of serving your clients,” Schweiss says. “I heard this same thing all the time from FPA members, and it’s a big point of frustration to this day.”

Schweiss says he continues to hear stories from fellow CFPs about incomplete or even dishonest representations being made to their retirement-focused clients or prospects by brokerage or insurance professionals.

“The FPA members were always asking me what we could do, because there would be this insurance agent across town telling people that he was a ‘financial planner,’ too, but all he did is sell million-dollar life insurance policies to any pre-retiree who would listen,” Schweiss says. “Unfortunately, this is going to be a difficult problem to solve.”

That said, Schweiss believes the Labor Department’s pending regulatory action could be a positive step forward, and one the fiduciary advisory industry can utilize as a communication and education opportunity, at the very least. He also gives credit to the SEC for its more aggressive stance against conflicts of interest, and to the Certified Financial Planner Board of Standards, which is reassessing and revamping its own competency and loyalty standards.

“I think we can all anticipate continued, assertive rulemaking while the Biden administration remains in office,” Schweiss says. “I don’t think stricter standards will damage our industry, but it will cause some ongoing evolution, and that’s a good thing. If you look back three or four decades, there was essentially no fee-based financial planning available for retail consumers. Today it is half of the marketplace, so we are making slow progress.”

Diverse Approaches Will Remain

Mallaney shares that point of view, especially when it comes to addressing the complex planning needs of affluent and middle-income pre-retirees.

“What I try to help my clients understand is that my value is not tied to a product or sale,” she explains. “My value is the creation of a financial plan that then becomes the beginning roadmap for us to engage and start making decisions. My job is to be planning for their income needs three, five and 10 years out. They start to understand that the investments are such a small part of the overall picture.”

Thinking of her own early career background as a brokerage professional, Mallaney says she still sees the importance of having different client service models. Not everyone has to be a fiduciary in all situations. The real issue is when clients are confused about what type of professional they are working with.

“Of course, it may be perfectly fine for a 35-year-old young professional to use a Fidelity broker working on commission to help them invest some excess savings to get them set up with a decent portfolio,” Mallaney says. “But, at a certain point in time, people should start to be pushed towards the holistic, fiduciary style support that fits their needs and keeps their best interest first.”

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