Financial Planning Groups Profit From New Industry Chief
Call it bad blood, or maybe a turf fight. However you look at it, the relationship between the financial planning industry’s two biggest trade groups has had dark moments.
Although both associations see the need to burnish their industry’s image by weeding out investment scam artists and establishing professional standards, they have feuded over how to do it.
Enter Colin (Ben) Coombs, a financial planner from Woodland Hills. Since becoming president in September of the Denver-based Institute of Certified Financial Planners, the industry’s No. 2 trade group with 18,000 members, Coombs has developed a reputation as an effective fence-mender.
Respected by Rivals
Soft-spoken and bespectacled, Coombs, 48, has even won the admiration of officials of the rival organization, the 24,000-member, Atlanta-based International Assn. for Financial Planning.
“In a business of high-powered sales people, he’s anything but a high-powered sales person,” said Hubert L. Harris, executive director of IAFP.
Said Alexandra Armstrong, president of IAFP: “If I weren’t a financial planner, he’d be mine.”
For all of Coombs’ diplomacy, it’s doubtful he can single-handedly unite the disparate interest groups in the financial planning industry. But many financial planning experts hail his emergence as a national leader in the field, saying the time has come for a peacemaker.
Groups Trade Fire
In the past, sniping at each other was a favorite sport of industry leaders. IAFP partisans have sneered at the Denver-based group for having a membership exclusively of graduates or students of the correspondence course offered by the affiliated College for Financial Planning. They call ICFP a selfish interest group existing principally to promote the certified financial planner designation granted by the college.
ICFP supporters, on the other hand, have said that IAFP, whose membership includes financial planners with various kinds of training as well as people who wholesale investments to the planners, is more dedicated to championing commercial interests than professional standards.
The two groups also have shot down each other’s regulatory and standard-setting proposals.
At the same time, they have mimicked each other’s favorite membership programs, even though many financial planners belong to both organizations. For example, the organizations traditionally have offered competing liability insurance coverage to members instead of trying to team up to offer a single policy with lower rates, as Coombs is proposing.
The backdrop to this infighting has been the boom in financial planning in recent years as consumers have wrestled first with rampant inflation and then with deregulation of the financial services industry.
Cleaning Its Own House
Thousands of people from such fields as insurance, securities and accounting started calling themselves financial planners, purporting to offer impartial, comprehensive guidance. Although many are legitimate, some have proven to be charlatans, promoting their own companies’ investment products or, in the worst cases, investment frauds.
The problem, industry officials say, stems largely from a lack of regulation.
Many financial planners have licenses as insurance agents or investment advisers, but neither the federal government nor the states require licensing specifically for financial planners. Thus, anyone can go into the business.
“You can call yourself a financial planner just like you can call yourself a lawn consultant or a landscape designer,” said Royce Griffin, Colorado’s securities commissioner and president of the North American Securities Administrators Assn.
Move to Force Registry
In California, the state Senate passed a bill three weeks ago that would require financial planners to register with the state, pass a test and disclose their background and any possible conflict of interest to clients.
Similar, but less comprehensive, regulations were adopted by the state Department of Corporations last month. Those rules require financial advisers to disclose any interests they have in investments they recommend.
The problem of minimal regulation is aggravated by the industry’s lack of a universally accepted equivalent to professional designations such as the accounting field’s CPA, or certified public accountant, and the insurance business’ CLU, or chartered life underwriter. Consumers, consequently, cannot easily tell just how qualified financial planners are.
From the industry’s standpoint, the situation threatens to give rise to major investment scandals that could blacken the reputation of all financial planners. Industry leaders also fear that, if they do not take the initiative on regulation, government officials may move ahead and saddle them with heavy-handed supervision.
IAFP has pushed for establishment of a self-regulated organization, a nationwide, independent industry group akin to the National Assn. of Securities Dealers that would have the power to issue and revoke licenses for financial planners.
To help consumers pick financial planners, IAFP set up a registry for planners who meet specified educational and professional requirements.
Standards Board Created
On the other hand, Coombs’ group has called for state securities regulators to step in and supervise the financial planning industry. ICFP officials last year also created the International Board of Standards and Practices for Certified Financial Planners, an organization intended to set standards and certification requirements much the way the Financial Accounting Standards Board and state regulators do. IAFP was invited to name two members to the organization’s board but refused, following the usual pattern of rivalry between the trade groups.
Coombs hardly comes across as someone with the force of personality to persuade two large, feuding organizations to put their disputes aside. He is a self-effacing man known as “Gentle Ben” to many of his colleagues.
After studying business at UCLA and following his father into the insurance business in 1960, Coombs didn’t exactly set the world on fire. He said he never was comfortable selling insurance because he really wanted to be a financial adviser and not a salesman.
“I knew there was more to talk about than death and estate problems,” he said.
First Effort Failed
Coombs opened a financial planning practice in Sacramento in 1971, when the field was in its infancy, but his business folded within a year. Coombs said he thought he invented the concept of financial planning but quickly discovered he wasn’t alone in the business.
“I also quickly discovered that I didn’t know what I was doing,” he said.
Coombs then completed the College for Financial Planning program and, in 1976, opened his Woodland Hills firm, Petra Financial Group. Petra, which charges a minimum planning fee of $750, has served 450 people and has 125 active clients.
Industry leaders say Coombs’ rise in his organization has inspired hope that initiatives for improving the field will move forward. For instance, Coombs has said he would support IAFP’s proposed self-regulatory organization if it comes into being.
Armstrong, the IAFP president, said that kind of conciliatory talk wasn’t possible until Coombs began his one-year term as ICFP president.
Coombs also is credited with extending an olive branch to the American College of Life Underwriters in Bryn Mawr, Pa. The school is viewed in some quarters as a rival to the College for Financial Planning in that it offers graduates a similar designation, chartered financial consultant. Coombs’ apparent aim is to work with American College to provide consistent standards for training and testing financial planners.
Liability Insurance Problem
He also helped launch a task force with IAFP to explore ways to ensure that financial planners can continue to get liability insurance. The withdrawal of many insurers from liability coverage and skyrocketing rates for the available coverage have created major problems in many other businesses.
One of Coombs’ goals is to open talks with the American Institute of Certified Public Accountants. Accountants have moved aggressively into financial planning, but, in some cases, have resisted regulation.
Although Coombs’ initiatives appear modest, industry officials say his efforts have gone a long way toward healing wounds in the financial planning industry.
“The bad blood is evaporating,” said Harold W. Gourgues Jr., an Atlanta-based consultant to the industry.
