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Financial Planners Can Do Better Than FINRA-FP

If there's to be an SRO, a more selfish self-regulatory model makes sense.

Organizations representing financial planners are on the spot. A subcommittee of the House Financial Services Committee will hear testimony Tuesday on a draft bill that would create a self-regulatory organization for investment advisors, or IA-SRO. If financial-planner organizations do not move quickly to develop an IA-SRO for their members, they might be consigning planners to regulation by the SRO for broker-dealers, the Financial Industry Regulatory Authority, commonly referred to as FINRA.

A group of my students has created an IA-SRO in anticipation of the IA-SRO bill becoming law. Their Self-Regulatory Organization for Independent Investment Advisors, or SROIIA, is intended to offer an alternative to FINRA for non-broker-dealer investment advisors. SROIIA has certain advantages over FINRA that would enable it to offer a superior IA-SRO alternative for financial planners. However, the financial-planner community will need to get behind SROIIA well before the IA-SRO bill becomes law in order to compete with FINRA in the IA-SRO market.