A coalition of three prominent financial planning trade associations called for legislation to create a national organization to oversee the financial planning profession but prevent the Financial Industry Regulatory Authority from acting in that capacity.

The Financial Planning Coalition, comprising the CFP Board of Standards, the National Association of Personal Financial Advisors, and the Financial Planning Association, said the oversight body would set standards of ethics and competency for financial planners and would establish rules to promote the fiduciary standard of client care when providing financial planning services.

The coalition’s proposal would preclude FINRA from consideration as the regulatory body for financial planners. “The coalition believes that FINRA would have an inherent conflict of interest in this role, as it is a membership organization for the broker/dealer community,” said a statement from the group. “As the regulator of securities dealers and transactions at the suitability standard of care, it lacks the experience, expertise and understanding required to exercise appropriate oversight of a profession that provides comprehensive financial advice under the fiduciary standard of care.”

FINRA has come in for its share of criticism in the wake of the financial crisis, and the reputation of financial planners has been further tarnished by the Bernard Madoff scandal.

However, former FINRA CEO Mary Schapiro was selected as the new chair of the Securities and Exchange Commission because of her reputation as a tough enforcer. The coalition of financial planning groups, however, sees the handwriting on the wall as the SEC plans to submit hedge funds and other investment managers to tighter scrutiny as part of a larger overhaul of the regulatory structure of the financial industry.

“In the wake of the financial crisis and with widespread distrust in Wall Street, now more than ever the public needs to know that those who offer financial advice are competent, ethical and committed to the best interests of their clients,” said the coalition in its statement.

“As part of comprehensive regulatory reform of the financial services industry, we believe it is time for Congress to take bold steps to enhance consumer protection by establishing common-sense, practical regulation of those who advise on financial matters.”

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