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 NIPA.
And lest there be any undisclosed conflicts, I am an ERPA and I am a member of ASPPA’s Board of Directors.