Investment advisers welcome a rule from state regulators that could require them to spend more time boning up on the latest in ethics, product developments and practice management.
The North American Securities Administrators Association approved a model rule Monday that would allow states to require investment adviser representatives in their jurisdiction to complete 12 hours of continuing education annually.
The CE would consist of six hours of ethics and six hours of product and practice coursework. The state regulators are targeting IARs because they currently don’t have to meet a CE requirement to maintain their state licenses, according to a NASAA statement.
“I personally love the idea of raising the standard for IARs,” said Donovan Brooks, founder of Storyline Financial Planning. “Honestly, CE should be the norm. Many advisers are already a part of organizations, or possess certifications, that require an amount of CE hours each year so this would really be targeting those specific advisers that aren’t required to do any CE.”
Under the model rule, IARs who are dually registered as brokers would meet their state CE obligation if they obtain the CE required for registered representatives by the Financial Industry Regulatory Authority Inc. States also would accept CE required for certain financial advice credentials — such as the certified financial planner and chartered financial analyst marks — if the educational material is approved for IAR CE.
Advisers who hold a CFP or are members of an organization such as the National Association of Personal Financial Advisors, which has its own CE requirements, want to expand CE obligations.
“I am in support of a baseline requirement for continuing education in the investment adviser space, and 12 hours does align well with a ‘minimum’ level,” said David Wattenbarger, president of DRW Financial. “Advisers who belong to an organization like NAPFA or who hold a designation such as CFP are already exceeding this number of hours.”
The educational requirement for advisers who previously haven’t had to obtain CE doesn’t seem like a heavy lift to Travis Tracy, founder of Fortitude Financial Planning.
“Twelve additional hours isn’t a lot in my opinion,” Tracy said. “At the end of the day, it’s all about being able to serve clients the best you can.”
Aligning CE requirements for all financial advisers is a good move, said Jason Ewasko, managing director of Cipperman Compliance Services.
“Given that Finra already has a continuing education requirement for registered representatives, it makes sense to have a similar requirement for IARs,” Ewasko said.
But in comment letters about the CE model rule when it was proposed earlier this year, some small IARs asserted that the extra CE will add burdensome regulatory costs and distract from their work with clients.
“Over my lifetime, I have experienced more and more regulatory red tape, none of which has changed how I manage money nor how I treat my clients,” W. Howard Thompson, president and chief investment officer at Crescent Sterling, wrote in an April 13 comment letter, “It has been nothing more than an additional cost of both time and money at the detriment of my clients as those resources have been diverted from clients.”
On the bright side, CE options are proliferating online thanks to the coronavirus pandemic, said Ron Strobel, founder of Retire Sensibly. He said his inbox overflows with offers for CE-eligible webinars.
“It’s never been easier to meet one’s CE requirements,” Strobel wrote in an email.
The NASAA model rule must now be adopted by individual states either through legislation or a regulatory process. The time frame will vary from state to state.
“This model rule represents the culmination of years of work by state securities regulators and industry to develop a relevant and responsive continuing education program,” Lisa A. Hopkins, NASAA president and West Virginia senior deputy securities commissioner, said in a statement. “This successful collaboration will help promote heightened regulatory compliance while also helping investment adviser representatives better serve their clients by remaining knowledgeable of current regulatory requirements and best practices.”
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