Looking forward to 2024 and beyond, our Executives sat down and captured their beliefs and memorialized goals for our advocacy efforts in a vision statement. All of us here at XYPN are on a mission to help others live their great lives and our advocacy efforts are a direct extension of that mission—for our members, their clients, and all fiduciary planners.
With that in mind, we’re excited to share XYPN’s Advocacy Vision Statement:
XYPN believes that professional advice¹ should only be delivered under a fiduciary standard of accountability, that consumers should be able to rely on all services being delivered under a fiduciary standard whenever professional advisory services are marketed, and that advisors should be able to structure their advisory fees in whatever manner clients may wish to compensate their advisors for their professional services.
Currently there are numerous regulatory gaps in these areas on the federal and state levels. Historically, financial advisors were product salespeople, regulated by the type of investment or insurance products they sold to or implemented with clients. Without clear demarcations between product sales “recommendations” and client-centered advice, the end result is that advice is regulated not as advice itself, but under a caveat emptor sales approach to advice-as-a-sales-device regulation, without any Duty of Loyalty and Duty of Care obligation from the advisor to their client.
In practice, as policymakers have permitted the convergence of salespeople and advisors, consumers have become confused by salespeople donning misleading advisor-like titles that imply relationships of trust and confidence – i.e., a fiduciary standard – that doesn’t actually exist. Which in turn results in conflicted advice for which salespeople are rarely held accountable (given the lower standard attached to product salespeople), and leaving the overall integrity of the financial advice industry in question. As shown in a recent Gallup poll ranking professions based on honesty and ethics, stockbrokers and insurance salespeople are ranked only marginally higher than members of Congress and cars salespeople, while the medical profession is at the top of the list. When consumers have a low level of trust in the financial advice industry, all financial advisors suffer (primarily in the form of higher client acquisition costs that raise the cost of doing business and can drive even high-quality advisors out of business).²
XYPN’s vision is to resolve these issues through a clearly articulated vision of updating public policy to meet the realities of consumer expectations in today’s marketplace. In particular, XYPN’s goal is to establish financial planning as a recognized profession, separate from the reputable financial products manufacturers and distribution intermediaries who fulfill an important but separate mission by offering products needed to assist the financial planning professional in implementing client-centered recommendations.
As such, consumers should easily distinguish between product-related sales recommendations, ideally offered by the salesperson to the financial planning professional, with the end result being a supportive role that assists the financial professional in objectively assessing how the product best fits into a client-centered engagement. Put another way, the client easily distinguishes the different roles of the product vendor and financial planning professional, just as the public differentiates pharmaceutical wholesalers from doctors. Evidence of this progress may include media marketing that begins with “Ask your financial planner about [product], to see if this helps address [description of financial topic].”
With regard to the existing regulatory framework, XYPN intends to advocate for the following:
- The separation of sales from advice, in which the offer and delivery of financial planning services by individuals holding out as a financial planner or using similar titles, or offering to provide or deliver financial planning or similar advisory services, are deemed to be acting in an advice capacity and therefore are held to the fiduciary standard. Product salespersons, by contrast, are readily identified as salespersons, and then are held to a sales-appropriate standard of conduct.
- Consistent federal and state regulation of financial planning fees regardless of the particular type of fee-for-service business model, including the flexibility to receive various forms of reasonable compensation, such as hourly, monthly subscription, quarterly or annual retainer, or other fees paid directly by the client, in light of services provided. Compensation should be paid directly by the client to the professional or his or her firm for services, without any direct or indirect receipt of material financial compensation from product vendors.
- Other policy changes consistent with XYPN’s policy goals of establishing financial planning as a recognized profession.
¹ XYPN uses the term “professional advice,” “advisor” and “financial planner” to connote the offer and delivery of professional services by a professional in a fiduciary relationship. In contrast, where the Vision Statement refers to a salesperson, the context is someone who establishes an arm’s length, transactional relationship with the customer. The roles are not interchangeable.
² See, e.g., George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” 84 Q.J. ECON.. 488 (1970).
About the Author
Lisa Larrivee is XYPN's Director of Content Marketing. In her role, she enjoys telling stories that bring the XYPN experience to life and connect souls in impactful ways. When she isn't busy creating, connecting, and communicating, she loves making memorable moments with her kiddos so they have their own stories to share and connect with the world.
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