B.C. planner quitting securities industry in regulatory dispute

(December 10, 2003) A prominent B.C. financial planner is quitting the securities side of the industry in a regulatory dispute with his dealer and the IDA. Bernie Geiss — a fee-for-service planner currently with Berkshire Securities in Vancouver — says he’s selling the investment side of his business in January and resigning from the brokerage industry.

“I’m no longer going to participate in that circus called securities regulation,” Geiss told Advisor.ca.

The disagreement centres around a recent IDA rule that makes member firms responsible for supervising the financial planning activities of its agents and employees.

Geiss says Berkshire interprets the rule as forcing them to regulate his financial planning activities. That means invoicing for all financial plans must be done through Berkshire, who would then collect a 20% fee for each plan.

“I feel this is entirely inappropriate,” says Geiss, who provides full planning service for his clients using his own proprietary software. “Berkshire does not have the staff, the expertise or the capabilities to even understand what I’m doing for my clients, let alone approve it.”

“My fees start at $3,000 a plan,” he adds. “They’re going to make $600. They have a financial planning program but it is a joke compared to what I use.”

Geiss, a 2001 Advisor of the Year award winner, admits his situation is rare, considering that very few firms allow fee-for-service planning, but he says there are larger issues involved. “The rules are written to deal with the few bad apples in the bunch. They don’t recognize professional skills and abilities.”

The IDA rule states that financial planning is a securities-related business “in that the nature and extent of any investment recommendations to a client are inextricably tied to the overall plan.”

However, Larry Boyce, the IDA’s vice-president of sales compliance, says it’s up to individual firms to decide how to follow the rule.

“Our requirement is that the firm have a procedure or system in place to supervise,” he says. “That doesn’t mean they have to look at every plan or pre-approve every plan.”

Boyce says the IDA is forming a committee to try to develop minimum standards for the financial planning rule, as they have done in other supervisory areas. But he says it’s a matter of protecting the public interest. “Our answer is that for this kind of planning activity, the whole package should be done through the dealer.”

Advocis is also involved in the dispute, publicizing the issue in a recent e-mail bulletin sent to members.

Beverly Brooks, Advocis’s vice-president of public affairs, says requiring supervision of planning activities, but not necessarily pre-approval, is confusing. In Geiss’s case, she notes that Berkshire’s insistence on pre-approval could delay the planning process for weeks, as well as cost money.

“We’re investigating some issues for another member regarding the IDA’s move into financial planning and we’re asking whether others are being affected in the same way,” she says.

Brooks says there have only been a few reported cases, but suggests that might be because dealers haven’t realized the implication of the new rule. “Perhaps we’ll hear more in the next few months,” she says.

Geiss says he welcomes help from Advocis. “I think they are very serious about this issue and I’m hoping there will be some sort of collective grassroots revolution that would ultimately change the position of the IDA.”

Meanwhile, Geiss is looking to the British Columbia Securities Commission (BCSC) for a more permanent solution. He says he’s encouraged by the BCSC’s proposals to revamp provincial securities legislation to allow advisors to be licensed directly with the commission without dealer sponsorship or becoming an IDA registrant.

“This addresses the issue that I’m concerned about: the ever-increasing role of the IDA to control all activities of the registrant even if it’s not securities related,” he says.

“It shouldn’t carry on this way,” Geiss insists. “We all want to free ourselves of the burden of what we perceive as unnecessary compliance exercises.”

Geiss says he will continue to provide comprehensive financial planning for his clients, but will only offer asset allocation recommendations, referring the actual implementation of the investment plan to another advisor. “This will be better for my clients, better for me, and it could serve to set an example that I hope other people will look at.”

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What do you think of Geiss’s decision to quit the securities industry? Do you agree or disagree with his reasons for leaving? Speak out in “Free For All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com

(12/10/03)

Doug Watt