Serving as a Unified Voice for the Financial Planning Profession. FPA of Florida Makes 14th Trip to Tallahassee. September 23-24, 2013

Transcription

1 Serving as a Unified Voice for the Financial Planning Profession FPA of Florida Makes 14th Trip to Tallahassee September 23-24, 2013 The historic Capitol building now restored to its 1902 appearance. Representatives from the FPA of Florida in attendance: Paul Auslander, CFP American Financial Advisors Orlando FPA of Central Florida 2013 Chairman, FPA (National) 2014 President, FPA of Florida Bill Dyess, CLTC Dyess Insurance Services Fort Lauderdale FPA of Greater Ft. Lauderdale Chris Draughon, CFP First Coast Wealth Advisors, LLC Jacksonville FPA of Northeast Florida Charlie Fitzgerald, III, CFP Moisand Fitzgerald Tamayo, LLC Maitland FPA of Central Florida 2013 Chairman, FPA of Florida

2 Roger Johnson, CFP Certified Financial Group Altamonte Springs FPA of Central Florida Paul Miller, CFP Indian River Financial Group, Inc. Ft. Lauderdale FPA of Greater Ft. Lauderdale Karen Nystrom Director of Advocacy, Denver, Co FPA National Financial Planning Association Ashley O Kurley, CFP John Hancock Financial Network Miami FPA of Miami Claudia Sachs, CFP First Florida Investment Services Tallahassee FPA of Gulf States Michael Zmistowski, CRC Financial Planning Advisors, LLC Tampa/St. Pete FPA of Tampa Bay 2013 President, FPA of Florida September 23, 2013 Meeting and Dinner FPA of Florida members began our trip with an update from Karen Nystrom, the FPA s new Director of Advocacy. Karen worked previously with the National Association of Personal Financial Advisors (NAPFA) where she served in a similar capacity. Karen updated members on FPA s Advocacy agenda and priorities, making positive points. Special guests to our dinner included: Robin Westcott, Florida Insurance Consumer Advocate Lisa Miller, Lobbyist, Lisa Miller & Associates, former Deputy Chief Financial Officer and Chief of Staff for Department of Financial Services and former Deputy Commissioner for the Florida Office of Insurance Regulation Phil Fountain, former Assistant Director in the Division of Agent and Agency Services in the Florida Department of Financial Services Bill Reilly, Associate Director, Oyster Consulting, LLC and former Chief of Securities Regulation from the Florida Office of Financial Regulation Discussion during dinner covered a variety of topics including: Citizens Property Insurance, health insurance law changes, fee only insurance licensing in Florida, and FPA s efforts to see a bachelor degree in personal financial planning introduced into one of our 12 state universities. We also discussed the exemption CPAs have when providing insurance advice to clients incidental to their Public Accounting practice (statute ). From previous meetings, the Department of Financial Services is supportive of a similar exemption for Certified Financial Planner professionals in Florida, especially since a large part of this professional s training and work involves advising clients on risk management and insurance needs. September 24, :45 AM Meeting with Florida CFO Jeff Atwater and presentation of Financial Planning Week Resolution FPA of Florida delegates thanked CFO Atwater for sponsoring the resolution for Financial Planning Week This marks the 8 th year the FPA has received this resolution.

3 We spoke briefly with CFO Atwater and updated him on our efforts to see a Florida university offer a degree in personal financial planning. He supports this idea and agrees that it does not make sense that students in Florida have to travel to the University of Georgia to find the closest four year degree. Pictured (from L-R): Ashley O Kurley, Karen Nystrom, Charlie Fitzgerald, III, Florida Chief Financial Officer Jeff Atwater, Chris Draughon, Roger Johnson, Michael Zmistowski, Paul Auslander, Bill Dyess, Claudia Sachs and Paul Miller 9:00 AM Members attended first part of the Florida Cabinet Meeting

4 9:30 AM Members visited the offices of senators on the Insurance and Banking sub-committee Since this year s trip fell on Committee Week, when members meet for the first time to start working committee agenda items and prepare for the spring legislative session, we decided to reach out to a few important senators and representatives. But because the senators were in meetings, we met with several legislative assistants including: Jean Van Smith, Legislative Assistant for Senator David Simmons Michael Nachef, Legislative Assistant for Senator Garrett Richter Douglas Roberts, Legislative Assistant for Senator Tom Lee In our meetings, we introduced the FPA and provided promotional brochures. We touted the significance of the financial planning process and FPA of Florida which has 1,200 members serve approximately 175,000 households with approximately $73 billion in investments. We also explained the importance of the CFP mark. We detailed the rigorous requirements to accomplish and maintain the CFP mark. We also discussed the role of the CFP Board Disciplinary and Ethics Commission (DEC) which is responsible for interpreting and applying the CFP Board's Standards of Professional Conduct. The DEC has the authority to suspend or revoke the rights of an individual to use the CFP mark. We did not bring a specific legislative agenda but tried to see if there were any legislative initiatives that would be of interest. None were determined, although this could change in the future. During our meeting with Senator Simmons Legislative Assistant, we arranged for the Senator to introduce us during that afternoon s Insurance and Banking sub-committee meeting. Senator Simmons serves as the Chair of this subcommittee. We have learned through experience that the most influential group of senators and representatives to the FPA are the members of the Insurance and Banking sub-committees. We encourage all FPA members to meet these legislators in their home districts. The FPA can help our members conduct the meeting by providing written materials and basic talking points. Below are the current members: Florida Senate Insurance and Banking Subcommittee members: David Simmons (R) - Chair Jeff Clemens (D) - Vice Chair

5 Lizbeth Benacquisto (R) Nancy C. Detert (R) Miguel Diaz de la Portilla (R) Alan Hays (R) Tom Lee (R) Gwen Margolis (D) Bill Montford (D) Joe Negron (R) Garrett Richter (R) Jeremy Ring (D) Florida House Insurance and Banking Subcommittee members: Bryan Nelson (R) - Chair Bill Hager (R) - Vice Chair Dwayne L Taylor (D) - Democratic Ranking Member Douglas Vaughn "Doug" Broxson (R) Matthew H. "Matt" Caldwell (R) Tom Goodson, (R) Clay Ingram (R) Shevrin D. "Shev" Jones (D) Larry Lee, Jr. (D) George R. Moraitis, Jr. (R) Kevin Rader (D) David Santiago (R) John Tobia (R) 11:00 AM Meeting with representatives from the Florida Office of Financial Regulation Standing (from L-R): Paul Miller, Bill Dyess, Roger Johnson, Chris Draughon, Ashley O Kurley Claudia Sachs, Greg Hila, Charlie Fitzgerald, III, Lee Kell. Seated L-R: Paul Auslander, Karen Nystrom, Pam Epting and Michael Zmistowski FPA of Florida delegates met with: Greg Hila, OFR Deputy Commissioner Pam Epting, Director, Division of Securities Lee Kell, Chief of Enforcement

6 We discussed a variety of topics: FPA members met Lee Kell, who is new to the OFR and brings solid experience to his position as Chief of Enforcement. He is already making significant progress and shared the following information: o The OFR examined 175 Registered Investment Advisor (RIA) offices during the 12 months ending June, 2013 and will examine over 200 in the next 12 months. There are 1,103 investment advisor firms domiciled in Florida and another 400 that are domiciled outside of the state. It is OFR s goal to examine each advisor once every five years. o Of the 175 RIA exams performed in fiscal year ending June 2013, 53% required no action, 41% had problems that needed to be corrected and 6% resulted in serious enforcement actions including cease and desist orders. o In the fiscal year starting July, 2013, there have been 45 exams. Of these exams, 34% involved no action, 59% resulted in corrective follow up and 7% resulted in suspensions, fines and cease and desist orders. o o To view the OFR penalty matrix, please see their website: The most common compliance issues are: Failure to file financial statements (accrual basis) within 90 days of the RIA s fiscal year end. Books and Records deficiencies, including: Improper advertising Improper invoices and fee calculations for clients Missing client contracts Failure to offer annual ADV/Brochure Missing client correspondence and s Missing client suitability information Supervisory procedures were not in writing Records for the past 24 months were not kept on site. ADV/Brochure - inaccurate or not current Prohibited practices: Borrowing from clients Offering guarantees Excessive trading Misstated credentials of advisors Improper invoicing when fees are deducted directly from client s accounts creating custody problems We learned that since July of 2013 the OFR Registration staff is spending about 1 to 1 ½ hours with newly registered RIA firms to ensure that all compliance basics are being appropriately addressed to avoid problems in the future. We are pleased to see this proactivity. During our previous visit in the spring, we identified problems where advisor s ADV Part 2 filings weren t being posted on the state s website in a timely manner. This created a significant hardship for advisors whose prospective clients couldn t locate their information and for E&O insurance applications. Florida is a review state meaning ADV filings do not appear on the website until they are reviewed and approved by the state. The OFR informed us the matter has been corrected as they now have assigned a dedicated reviewer to expedite the process. The OFR seems to be working hard to apply private sector management techniques to their role as regulator. We were told they are working to: educate, be proactive, supportive of new businesses, streamline processes, and to sanction those who are not following the rules. One OFR legislative effort the FPA supported last year that succeeded was to speed up and streamline the registration process for brokers and investment advisors by permitting Live Scan Electronic Fingerprinting, effective October 1. The electronic finger printing locations must be approved by the state. The Legislative effort initiated by the Financial Services Institute to speed up the Branch Office registration process for state broker/dealers and advisors (HB783) has succeeded. Registration of new branch offices no longer requires the OFR to approve the application before the branch office can open. Now, the new branch office can open after a Notice Filing is provided to the state. However, if the Notice Filing application is deficient, the OFR can exact steep financial penalties if the deficiencies aren t resolved quickly. Generally, the state will require a response of any deficiency within 30 days. The OFR

7 said that presently 15% of Branch Office applications have deficiencies. Infraction penalties can start at $5,000 per infraction. Currently, Florida requires $2,500 in net capital for all state registered investment advisors. We questioned again how important this rule is if the investment advisor doesn t custody client assets. The SEC does not have such a rule for non-custody SEC regulated investment advisors. They assured us that they will be looking closely into this rule in the coming year, so we will continue to follow up. The OFR estimates they are supervising over 30,000 RIA affiliated advisors (investment advisors) and 80,000 registered representatives (stockbrokers) that are domiciled in Florida. FPA members present in this meeting have received complaints from other financial planners regarding three insurance agents who are aggressively and inappropriately selling annuities on the radio and on the internet in the Orlando market. From what we have heard, it seems these individuals are misrepresenting the products and selling them in a misleading way. We provided the names of the insurance agents to the OFR to investigate. The OFR said that even though these are insurance agents selling insurance products they are still interested. Often agents will cross the line and represent themselves as investment advisors and represent their products as investments which have attractive gain potential without downside market risks. Adding to their concern is that salespeople often direct their presentation to seniors who can be more easily misled. We were informed that the OFR is working to amend the Form U4 disclosure document so that stockbroker and investment advisor applicants must also disclose any disciplinary actions taken by the Certified Financial Planner Board of Standards. This is the result of a meeting between representatives for the CFP Board and the OFR in the fall of At the meeting, the CFP Board s disciplinary and enforcement practices were explained in detail. The OFR felt that any discipline or enforcement provided by the CFP Board should also be disclosed on Form U4. We continue to enjoy a positive relationship with the Office of Financial Regulation and appreciate their receptivity and hospitality. 2:00PM Senate Insurance and Banking Subcommittee meeting During the subcommittee meeting, experts from Citizens Insurance were reporting on the de-population of Citizens policies. This does not appear to be going away anytime soon. Citizens Property Insurance provides nearly 1.4 million insurance policies for Florida residents unable to acquire or continue property insurance due to cancelations. Senator David Simmons interrupted the meeting to introduce all ten FPA of Florida members to the subcommittee. This was very kind of him to once again give us this acknowledgment. He previously introduced us to the full Senate House in February, Afternoon Office Visits with Legislators: Next, FPA members met with three key legislators from the Florida House and discussed the following: A brief re-introduction of the Financial Planning Association. Our continued interest in pro-consumer legislation in Florida. Our interest to be a resource to state government officials on topics related to personal financial planning. Of the 12 Florida universities, not one offers a degree or major in personal financial planning. The nearest university that offers this undergraduate degree is the University of Georgia in Athens, under their Housing and Consumer Economics College. Representative Bryan Nelson (District 31, parts of Lake and Orange counties) o Rep. Nelson is the Chair for the Insurance and Banking subcommittee. o He mentioned an advisor on an Orlando AM radio program who is improperly selling annuity products. We told him we had already reported this specific individual and company to the Florida Office of Regulation.

8 Representative Mark Danish (District 63, Tampa area) o Rep Danish is Michael Zmistowski s representative, sits on the Florida House Education committee and has shown interest to help us with the goal of having at least one Florida university provide a personal financial planning degree. Representative Douglas Broxson (District 3, Pensacola area) o Rep. Broxson has been involved with annuity legislation for the last two years. We checked with him to see if there was any impending legislation regarding annuities and he was not aware of any. o Rep. Broxson discussed the idea of allowing a new, fee-only Florida insurance agent license. This way, a financial or insurance advisor could perform detailed, independent analysis and recommendations regarding insurance policies in Florida. They would not be allowed to receive any commission income, would be required to maintain continuing education requirements, and would not be required to keep their license with an insurance carrier. We anticipate the insurance lobby may resist this idea. But for consumers, it would bring independent and objective advice regarding insurance recommendations and would not be influenced by a sales transaction or commission. 4:00PM Meeting with the Office of Governor Rick Scott Legislative Affairs Director Darrick McGhee FPA members met with Darrick McGhee several years ago when he was the Director for Legislative Affairs with the Office of Business and Profession Regulation. Discussions today centered largely on the merits of seeing a Florida university offer a personal financial planning degree. Mr. McGhee thought this would resonate with the Governor in several ways: The degree would lead to immediate employment in a meaningful field serving the interests of Florida s citizens and our ever growing senior population. The degree could be attained in four years and lead to immediate professional employment in Florida. We felt it important that the degree simultaneously satisfy the education requirements to immediately sit for the Certified Financial Planner Board Exam, which is an important step to acquiring the CFP license. This would save the additional year of education required by many to sit for the CFP Board Exam. Most other personal financial planning degrees satisfy the educational requirements for an individual to sit for the exam. With this degree program, Florida students will not have to go out of state to acquire such a degree. The closest four year personal financial planning degree is at the University of Georgia in Athens. In a bit of irony, we talked about how two Floridians and two of the nation s foremost and recognized financial planners, Harold Evensky and Deena Katz, are now in Texas helping them build one of the nation s premier financial planning colleges. Texas Tech offers bachelor, master and doctorate degrees in personal financial planning. Many in the financial planning industry are pointing to a shortage of young, incoming financial planners to follow behind the middle-aged planners dominating the financial planning profession today. Degree programs across the nation, including Florida, will help to alleviate this expected shortage.

9 This report is submitted by: Charlie Fitzgerald, III, CFP 2013 Chairman of the FPA of Florida and Government Relations Committee member