Aging Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-6992

Title:

AN ACT PROTECTING THE INTERESTS OF CONSUMERS DOING BUSINESS WITH FINANCIAL PLANNERS.

Vote Date:

2/14/2017

Vote Action:

Joint Favorable

PH Date:

2/7/2017

File No.:

14

SPONSORS OF BILL:

Aging Committee

REASONS FOR BILL:

This Act will protect the interests of consumers doing business with financial planners.

The bill makes various changes affecting financial planners. It:

1. Establishes advertising and disclosure requirements for financial planners who are not subject to certain federal laws concerning investment advisors, securities, and retirement products;

2. Prohibits these financial planners from expressing or implying special training, education, or experience serving senior citizens unless they meet certain education requirements;

3. Requires these financial planners to disclose to consumers, upon request, whether they have a fiduciary duty with regard to each recommendation they make; and

4. Requires the Department of Consumer Protection (DCP) commissioner to post on the department's website certain information regarding financial planning professionals and consumers' rights.

RESPONSE FROM ADMINISTRATION/AGENCY:

Jorge L. Perez, Commissioner, State of Connecticut Department of Banking: Applauds the thoughtful efforts of the committee, but the bill may create unintended consequences on state or federally registered Investment Advisors.

Historically the State of Connecticut and the SEC have taken the position that you cannot truly function as a financial planner unless you give advice on securities. Therefore financial planners are presumed investment advisors who are regulated by both the DOB and the SEC and already have a fiduciary duty to act in the best interest of their clients.

Connecticut Department of Consumer Protection: Appreciates the intent of this bill and supports the goal of insuring that consumers have access to all the information that they need to make informed decisions when hiring financial advisors. However, DCP does not regulate the financial services industry and part 2 of the bill would be difficult to implement as written.

NATURE AND SOURCES OF SUPPORT:

No testimony submitted.

NATURE AND SOURCES OF OPPOSITION:

National Association of Insurance and Financial Advisors, CT: Opposes the bill. They applaud the general mission to protect consumers, and we share that goal, but the broad reaching implications of the bill would adversely affect the financial advisors who abide by the rule. Connecticut has no specific licensing requirements of anyone who would like to call themselves a financial planner.

David Ballaire, Esq., President & General Counsel, Financial Services Institute: Opposes the bill. Attorney Ballaire is concerned that the bill will be overly complicated and duplicate efforts which will confuse investors and increase costs. However, FSI does support legislative and regulatory initiatives that that will increase access to quality, individually tailored, affordable financial planning advice and consumer protection.

FSI members are able to offer clients a choice in investment products, services, and pricing models. The care a client receives may vary depending on the account type, service offered, and/or the registration status of the financial advisor resulting in the advisor owing the client a variety of legal duties depending on the types of accounts and services being provided. This can be confusing to the client.

American Council of Life Insurers & the Insurance Association of Connecticut: Opposes the bill. Submitted testimony and suggest this bill be rejected as it duplicates existing state and federal requirements, is burdensome and unnecessary.

Connecticut statutes currently provide restrictions on consulting fees and commissions. Written disclosure must be provided to and signed by the consumer before compensation can be received. And certified insurance consultants cannot receive commission or compensation from an insurer or producer in connection with the sale or writing of insurance to a person who they serve.

Reported by: Denise Turner/Rhonda Carroll

Date: 3/2/17