In the last few days, there have been several new media
reports of professional wrongdoing.
One describes a CPA
suspended for preparing a false tax return. Another
alleges a TPA firm provided conflicted advice when it referred clients to a CPA
firm in which it held a stake. Hopefully
the allegations will turn out to be false, but these situations reinforce the
importance of quality, unconflicted advice.
Fortunately, there have been relatively few examples of egregious
conflicts in our industry…at least not many have been exposed. However, our industry has not done as
thorough a job as it could to self-regulate. We do not have standards of practice similar to those
created for Enrolled Actuaries.
Unless individuals are Enrolled (Actuaries, Agents or Retirement Plan
Agents), Attorneys or Accountants, they are not subject to oversight or rules
of professional conduct.
Investment advisors must be licensed to engage in their trade, but the
examinations deal more with securities knowledge than with the duties imposed
on clients by ERISA. One does not
need to obtain any license or certification to hang out a shingle as a TPA,
recordkeeper or consultant.
It has surprised me how many colleagues have been outspoken
against the application of penalties to those who
inaccurately prepare Form 5500.
Some have been perplexed that they can no longer accept a client’s
instruction that all employee contributions were timely deposited despite
account statements that are clearly to the contrary. Others are surprised to hear that instructing a client to
back-date a plan amendment can amount to tax fraud. Still others lament the coming fee disclosure regulations,
because it will spell the end of retaining revenue sharing payments that far
exceed what their fees would normally be.
Just to set the record straight, I am not a fan of expanded
government regulation. I do,
however, advocate our industry setting high ethical and quality standards for the
work we do. Not only is it the
right thing to do, but it may also stave off potentially over-reactive government
intervention. As part of its
financial services regulatory reform efforts, the House has already passed a
measure that would create the Consumer
Financial Protection Agency, a new government agency whose jurisdiction
would include otherwise unregulated plan service-providers.
We must always act in the best interest of our clients and take
advantage of every opportunity to demonstrate our commitment to quality. This
could mean accepting responsibility for a mistake and correcting it rather than
hiding it. It may include voluntarily
subjecting ourselves to rules of professional conduct by becoming ERPAs or
devoting the time and effort to obtaining professional credentials like those
offered by ASPPA
And lest there be any undisclosed conflicts, I am an ERPA
and I am a member of ASPPA’s Board of Directors.