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Point/Counterpoint: What Should the Regulatory Requirements Be for Financial Planners Expanding into New Territories?

Lovaii Navlakhi, CFPShould financial planners expanding their practice into new territories be required to meet all certification and regulatory requirements in the new territory, or should they be allowed to practice based on compliance with certification and regulatory requirements in their home territory?

Lovaii Navlakhi, CFP, India says yes.

Let me try and equate this question with driving a car. The mechanism is the same. Every car has an accelerator and a brake, and if it is not automatic, a clutch too. The functions of each of these components, as well as of the steering wheel and the gears, and the rear view and side view mirrors are the same. However, in some countries such as mine (India), you drive on the left hand side of the road; and in others such as the USA, you drive on the right hand side of the road. We measure distance in kilometers, they in miles. Our left- and right-turn indicators are on the right side of the steering wheel, because the car is a right-hand drive; and it is opposite in the USA.

When I make a short visit to the USA, I am allowed to rent a car by producing my Indian license. However, I cannot decide to follow the rules of the road as I do in India and manage to survive in the USA. For example, almost all left hand turns are free in India – if I attempted to do that, I am not sure I would survive the first one in the USA.

Similarly, we do know as financial planners that calculation of retirement planning requires estimation of living expenses, inflation, rate of return both pre- and post-retirement as well as life expectancy. However, a planner from another territory may not be able to have a meaningful discussion as to whether the expenses projected are reasonable or not. The problem will be more acute when it comes to recommending solutions and providing advice. Apart from tax rules, there may be a behavorial bias towards certain products because of past affinity, or on account of tax breaks and incentives provided by the local regulator.

The requirement of certification and regulatory requirements is a must for planners to practice in a new territory. Apart from the technical aspects, the planner should be able to “connect” with the client; to be able to challenge some of the assumptions; to be able to add value in the discussions on the various areas of financial planning. Complying with local requirements, may be even having a three month internship with a local planner or “shadowing” him/ her in the meetings may go a long way in ensuring that the flag of the financial planning professional continues flying high globally.

Patrick Canion, CFPPatrick Canion, CFP, Australia agrees.

Lovaii makes some excellent points on the need for financial planners to comply with local laws in the territory in which they operate.  The work that planners do is inextricably linked to elements which are the purview of the government of the country in which they operate.  Taxation, estate planning, retirement planning: each sovereign nation determines the laws that shape these areas.  Equally, each country has its own licensing and policing regime to ensure the lawful operation of financial advisers in their jurisdiction.  Hence, I believe that any financial planning business should be fully licensed and certified in the country of operation, despite the inevitable challenges and indeed duplication this may place upon their business.

The greater opportunity for financial advisers is not a legal one, but an ethical one. We ourselves can become the standard by which regulators use the benchmark their compliance regimes by. The member territories of FPSB should continue to work together to set a common ethical and practice standard benchmark higher than required by any regulatory authority. By having exemplary international standards for CERTIFIED FINANCIAL PLANNER professional status we will ourselves become a synecdoche for advice excellence.

As the numbers of financial planners grow internationally, particularly in rapidly developing countries, the temptation can be to reduce standards to cope with demand or encourage even greater participation.  At a national level, this might even be done without compromising financial planners’ standing with local regulators. Yet we must always keep our eye on the international example we are setting, with a view to having our profession held in the highest regard, no matter which country or compliance regime we are operating in.

In achieving this, we can hope that regulatory authorities may grant concessions in recognition of our voluntary accountability to our peers for our professional standards.

1 comment to Point/Counterpoint: What Should the Regulatory Requirements Be for Financial Planners Expanding into New Territories?

  • Louise

    I believe that it is really important to keep the regulations among financial planners up because of the demand of their works. Financial planning requires knowledge, skills, and experience. Not every financial planner can guarantee positive results, the best one can be sought through certain regulations.

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