FSI: Pass-fail requirement unfair to advisors, investorsNews added by Benefits Pro on September 24, 2012

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Joined: September 07, 2011

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By Andy Stonehouse

Is it fair to base an advisor's financial savvy on his or her test results, and then post those results for the public to evaluate? Especially on an old-fashioned pass/fail scale?

A recent lobbying push by the Financial Services Institute has changed one part of the controversial BrokerCheck Disclosures system - a system designed to bring total clarity to the investment public on the background and skills of their advisors - by reiterating that posting the results of pass-fail tests might not provide an accurate image to the public.

The FSI considers it a win, stemming out of the most recent FINRA Board of Governors' meeting, suggesting that posting those scores would only provide vague information to investors, and would also be unfair to advisors who were simply taking the test to pass, not to try to achieve the highest score possible.

"We laud FINRA for increasing transparency while not moving the goalpost on financial advisors by publicly posting test scores taken on a pass/fail basis," said Dale Brown, FSI president and CEO, in a statement. "And access to these scores would only lend confusion to investors as there is no correlation between a score earned on a pass/fail exam and the quality of the advice provided by an advisor."

The discussion followed changes made to BrokerCheck in May, which ostensibly improved investor access to broker-dealer and investment advisor information. Those changes included centralized access to licensing and registration information on current and former brokers, a web-based search tool for local financial professionals and additional, expanded educational content.

At the time, Ketchum said that despite the changes, FINRA was not planning on making test score information available to the public and did not consider that information part of the overall disclosures necessary to the public.

In the meantime, FINRA has asked the SEC to make further amendments to the entire BrokerCheck system - requiring firms to add a reference and a link to the BrokerCheck system on their websites.

In a letter sent out mid-month by FINRA CEO Richard Ketchum, a request was made to have any participating member firms be more visible in their usage and affiliation to the BrokerCheck system by including material on the system, as well as web links on their own websites and any websites maintained or managed by anyone associated with the member firm.

Originally published on BenefitsPro.com
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