With widespread regulatory reform looming for the financial services industry, financial planners should advocate for stronger professional standards, a representative from the Financial Planning Association said on Monday.

Mark Johannessen, national chairman of the U.S.-based financial planning industry association, spoke at the CIFPs annual national conference in Halifax. He said the financial crisis has presented a strong opportunity improve regulation of financial planning as a profession.

“There is no doubt that we’re in the midst of regulatory reform,” Johannessen said.

In particular, the FPA is pushing for baseline standards of competency and the enforcement of a fiduciary standard of care for the delivery of financial planning services. In addition, Johannessen believes that regulation should allow the public to easily identify qualified and ethical financial planners who are subject to such regulatory standards.

But Johannessen fears that the crisis will spark knee-jerk reactions among regulators that could result in inappropriate changes to regulation. In particular, he is concerned that financial planners will face the same regulations as the broader investment industry, without consideration of factors unique to the profession.

“Our fear is that we are going to find ourselves subject to regulation by people who don’t really know what financial planning is,” Johannessen said. “Our job in financial planning is to constantly remind them that financial planning is different than just investment management.”

In the United States, the FPA has developed a coalition with two other organizations to push for stronger regulation of the financial planning profession.

Even beyond regulatory reform, financial planning in both Canada and the U.S. is facing major changes, Johannessen said.

“Going forward, I think what we’ll see in terms of the profession are definitely profound changes in the way that we all do what we do,” Johannessen said.

In the aftermath of the crisis, he expects client turnover rates to surge. Johannessen quoted figures from Charles Schwab and Company showing that in a typical year, roughly 2% of clients transfer their assets from one financial advisor to another in the U.S., and in the brokerage community, there is roughly 30% turnover. Because of the recent deterioration of client trust in financial professionals, Charles Schwab expects this year’s client turnover rates to hit 30% among advisors and 80% among brokers.

“There’s a lot of folks that are going to be transitioning relationships,” Johannessen said.

He expects to see a more distinct separation in the industry between financial planning firms and those engaged only investment advice. In addition, the downturn has prompted industry professionals who weren’t committed to financial planning to leave the industry, he said.

“It really did rattle to the core the financial planning community,” said Johannessen.

He has also witnessed a greater need for collaboration emerge from the financial crisis. In dealing with the challenges of the crisis, financial planners are increasingly teaming up and working together. In addition, he has seen an increasing number of mergers of smaller firms in the U.S.

“I think this will begin to end the small boutique shops and make larger firms as we go forward,” he said.

IE