HOUSE BILL REPORT
SSB 5085
BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Moore, Smitherman, Rasmussen and Johnson)
Regulating financial planners.
House Committe on Financial Institutions & Insurance
Majority Report: Do pass. (10)
Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Chandler, Ranking Republican Member; Baugher, Beck, Crane, Day, Dorn, Nutley, and K. Wilson.
House Staff:John Conniff (786-7119)
AS PASSED HOUSE APRIL 20, 1989
BACKGROUND:
Anyone can call himself or herself a financial planner. No federal or state law explicitly governs financial planners or financial planning. However, not all financial planners escape regulation of their activities as planners. Under the state securities statute, any person who provides advice related to securities must register as an investment advisor. While arguably no planner can provide adequate service without considering securities, some planners avoid registration by avoiding a discussion of securities.
In addition to the investment advisor regulation, individual planners may be certified public accountants, insurance agents, lawyers, or securities brokers governed by laws directly regulating their activities in general. Planners may also be members of one of the professional financial planning organizations, such as the Institute of Certified Financial Planners or the International Association of Financial Planners which condition membership and certification upon compliance with professional and ethical codes.
Some states and numerous public and private organizations have developed proposals for regulating or controlling the financial planning business. Legislatures have encountered problems in defining financial planning and in deciding who should be required to register with the state or whether there should be any registration beyond the statutes governing other professions.
Various financial planning trade associations have attempted to define financial planning by describing the financial planning process. In essence, financial planning is a process whereby the planner examines a client's finances, assets, and insurance and then recommends a plan for achieving financial goals. Most planners come from the insurance and securities business and earn both a fee for planning and commissions from the sale of financial products to the client to implement the financial plan.
SUMMARY:
The state Securities Act definition of investment advisor is amended to include financial planners and other persons who as an integral component of other financially related services provide investment advisory services to others for compensation as a part of a business or who calls himself or herself a financial planner. The definition of investment advisor is also amended to exclude certified public accountants whose financial planning is solely incidental to the business of accounting and amended to exclude radio and television.
No person may hold himself out as a financial planner or otherwise represent that he or she is a financial planner, investment counselor, or other similar term as identified by the securities division unless the person is registered as an investment advisor or is not required to register as an investment advisor.
Fiscal Note: Available.
House Committee ‑ Testified For: Mark Allen, International Association for Financial Planning; Bruce Ellis, International Association for Financial Planning, Western Washington Chapter; Gary Smith, I.B.A., (in part); Mark Kantor, IDS, (in part); and Jo Ann Jones, State Securities Division.
House Committee - Testified Against: Bob Cleaveland, Insurance Agents; Basil Badley, American Council of Life Insurers; and Larry Fowler, Washington Society of CPAs.
House Committee - Testimony For: All persons engaged in financial planning should meet the same requirements for registration as investment advisers under the state Securities Act. Many planners, if not most, are required to register as investment advisers already. Permitting exemptions, beyond those currently provided under the Securities Act, undermines effective regulation to prevent consumer abuses.
House Committee - Testimony Against: Requiring professionals such as CPA's and insurance agents to register as investment advisers is an unnecessary duplication of regulation. These professionals must adhere to standards specified under other statutes which are just as effective in preventing consumer abuse.
VOTE ON FINAL PASSAGE:
Yeas 94; Nays 3; Excused 1
Voting Nay: Representatives Nealey, Silver and Winsley
Excused: Representatives Wang