All About Getting Financial Planning Software Approved for Use
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Critical Things to Know About FINRA and Broker Dealer Compliance

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Here's 2005 FINRA responses to the question of approving financial planning software:

As you know, reps may use only sales material that their firms (through internal compliance departments) allow them to use. We are all aware that there can be internal struggles between marketing and compliance over what is acceptable and what isn't. If there are products or services you want to provide, but feel like you're not allowed, you will need to handle it internally. I would think raising it with your branch manager would be the first step. FINRA staff does not force a firm to begin using a certain product or to allow the use of a product that it has chosen not to allow - those are firm based decisions. I understand the issue you've described, but we generally do not intervene regarding these types of business decisions.

Financial planning software, when used with the public, is generally defined as a communication with the public. The rules regarding FINRA members' communications with the public can be found in FINRA Conduct Rule 2210. All communications with the public require approval by a FINRA member firm's compliance department prior to use, but not all communications require filing with FINRA Advertising Regulation Department ("the Department"). Depending on the communication's content, some financial planning software is required to be filed with the Department. We direct your attention to FINRA Conduct Rule 2210(c)(2) and IM-2210-6 for some of the Rule's filing requirements. Financial planning software must be looked at on a case-by-case basis to determine whether or not it must be filed with the Department. If you need assistance, you should talk to the compliance department of a FINRA member firm, and if the compliance personnel have questions, they are welcome to contact us. FINRA Conduct Rule 2210 and IM-2210-6 may be found online in FINRA Manual at http://FINRA.complinet.com/FINRA/display/index.html

All communications with the public used by registered representatives are subject to FINRA Conduct Rule 2210. They may be subject to the rules of the other regulators also, depending on the subject matter of the communication. This rule applies to communications about all products and services including financial planning software regardless of whether specific securities are identified. Under the rule, financial planning software is considered within the definition of Sales Literature. There is no separate sub-category for financial planning software. FINRA requires that a registered principal at the rep's firm approve internally all sales literature prior to use. It is the principal's responsibility to make sure the material is in compliance with the rule and to determine if the material must be filed with FINRA. The rule requires, among other things, that sales literature is fair, contains risk disclosure, does not contain misleading information and does not omit material information. The rule generally prohibits the use of predictions or projections of performance.

What Does All that Mean?

The short version is that everything a FINRA registered representative shows or gives to the public must be approved by the reps' Broker Dealer Compliance Department. This includes even generic financial planning software that doesn't have anything to do with investments.

So what do you need to do to use this financial plan software, or any other? Print out either a live report from the free sample financial plan, or demo's presentation pages (things you'd print out and show the public), and any associated downloads, like manuals, text that explains the reports, and submit it all to your BD compliance department (most all have legal request form/cover letters). This usually does not cost the rep any money. Make copies of everything, including the compliance submission form.

All of the generic financial planner software on this site should make it through your compliance department, no problem (as we, and hundreds of other reps, have done it all before).

Most Broker Dealers will approve financial planning software, but only if the rep takes the time to formally submit it to them using their submission forms. If you just ask them if they approve XYZ software, they'll just say no. But if you follow their submission process, most will approve most anything that looks reasonable.

Good BDs will either do the due diligence themselves and say yes, the mediocre ones will say they need to send it to FINRA to get an opinion and approval, or the bad ones will just say no.

All of the financial plan modules on this site have been approved by several BDs when submitted correctly. Sometimes, they say it has to be sent to FINRA. If they say you have to submit it to FINRA, then you may in trouble. Or if they say no, you're in trouble too. The following explains your predicament.

Why You're Always Being Told: NO!

Why do Broker Dealer compliance officers say no when asked about the usage of generic financial planning software?

What a good compliance person should do when they get the submission, is evaluate it themselves. Then if they think there is something investment-related that might need to be clarified before approval, they'll fax it to FINRA. Compliance officers have an open line to FINRA, so they can usually get the information to someone the same day, and get an answer back in a day or two. The FINRA is just going to say it's okay to use all of the generic financial planning software on this site as is. We know because we've been there and done that with good BDs in the past.

When things are approved, you then edit the Footer (View, Header and Footer) in both Word documents and Excel spreadsheets (even if they're protected with a password) to reflect the compliance approval number.

It's the compliance officer's job to use this procedure to get software approved for use by reps. If they don't do it like this, then you could just have a bad compliance person.

You're in trouble if your compliance person just says no, or doesn't want to submit it to FINRA. Then compliance is not doing their jobs, and you'll need to get with your BD management, to get to the bottom of the issue.

Your problems could be more serious than having compliance officers that are too busy to do their jobs. Their hands could just be tied by bad BD management. For example, say a Financial Profiles or NaviPlan wholesaler hounded your Broker Dealer management and sold them on how their financial plan software has been recently infused with millions of bucks by several big life insurance companies to make it always spit out too much life insurance recommendations, and how they'll get richer with it, and how much of a mass-discount they'll get if they only approve it, and no other financial planning software. They'll put their self-interests ahead of the reps, the clients, the investing public, and play along in a heartbeat. So if your BD says they only approve NaviPlan and/or Profiles, then this is why.

This may work for them in the short run, but over time, they're going to lose the best people, because they'll leave and go to a BD where they can run their practice they way they want to, and that puts the reps and investing public's interests first (e.g., LPL). That's how you make real money in the long-term.

Compliance officers also live in a world of fear. If they are negligent, they could be held personally responsible (which means they could end up paying lots of money from their own personal bank account). So to protect themselves, they just "Say No" to everything they can't get a black and white answer to, or things they are afraid of, or things they don't have time to research, or things they just don't like, or things they don't understand.

All of these things may pass FINRA's approval process, but may be banned just because of the narrow vision of a compliance person's, or BD management's personal opinion.

You are the one that has to determine the reality of the situation at your BD if you want to succeed in this business!

Nobody else is going to tell you if something really can be used or not, according to FINRA/SEC, unless you figure it out yourself. If you leave it to compliance officers, you may be stuck being told that you can't use anything except software that is geared to recommending too much life insurance, and you won't make any money like that if you want to be in the business of giving people what they want and need.

Compliance officers also want to tell you that everything you ask them to approve has to be sent to FINRA for approval. This is just passing the buck, and/or they're hoping they will annoy you to point of just going away and forgetting about it. As you know, this costs you time and money.

For example, two BDs approved the Model Portfolios without submitting them to FINRA by the competent compliance person reading the rules and coming up with a list of things that needed to happen to get them approved. But when we did the exact same thing with Royal Alliance/AIG, compliance immediately said they everything needed to be sent to FINRA to be approved. They wouldn't even approve our Financial Plan Fact Finders, which are way better than NaviPlan's (we know because we evaluated them, and found nothing of any value to "copy"). They didn't even take one minute to think about it, or look up the rules about using investment models. And this was AFTER the other three BDs already approved it.

The Critical Bottom Line

So the lesson here is that you, the financial planner and FINRA Registered Representative, need to do this kind of research BEFORE you sign up with a Broker Dealer. To them, it's around a 90% chance that you're just going to be a less than one-year flash in the pan anyway, because that's their average - so all they really care about is how much money they can suck out of you during this period.

Take their sales pitch with a grain of salt and stay focused on what your life is going to be like living under their regime day in and day out. The best way to do this is to grill any long-term reps about how they feel about the financial planning tools they're allowed to use.

First, if there are no reps that have been there more than five years, then that's red flag #1! See if you can talk with reps that have recently left - then ask then for their gripe list. You're not going to be told about any of these problems until AFTER you're on board - "Oh by the way, we're a NaviPlan shop. You can't use anything else, so don't even bother submitting other tools to compliance for FINRA approval."

The best way to test your prospective Broker Dealer, to make sure you're not going to be caught in their trap once you've signed up, is to get a branch manager to submit financial plan software you want to use to compliance for approval BEFORE you sign up.

In other words, while you're negotiating/interviewing, give hard copy print outs of all of the financial plan modules you want to use to the branch manager. Tell them that being able to use the financial software you like is a requirement of hooking up with their BD.

If there's no problem, then the branch manager will submit everything to compliance, they'll give an opinion, and then you'll hear back. If the branch manager doesn't want to do this (regardless of any lame excuse they give), or compliance says no, then just don't join them. This is a BD that's going to ruin your life.

If they say it has to be submitted by an actual rep with the BD to FINRA for approval, then tell the branch manager to do that. If it costs money, then tell the branch manager you'll split this cost with them. If they don't want to spend small amounts of money on recruiting you, then this is not a good BD to join. If you join, then you'll probably spend the rest of your life paying for that one mistake. There's hundreds of BDs out there that need fresh meat, and you're hiring them more than they're hiring you, so shop around until you find the one that works for you.

The bottom line is that you should never join a BD until they first approve all of the financial software that you want to use. If they don't, then you'll be stuck using something that's not going to work for you, you won't make any money, and you'll get fired, or will quit in less than a year.

Then you'll be stuck in the time consuming and expensive trap of having to switch BDs and transfer your business to the new one. Then the wars start because the old BD will try to screw you as much as possible by keeping all of the clients and work you put into your practice.

First it will take months to find a BD that's right for you. Then it will take thousands of dollars to join them. Then it will take hundreds of hours and dollars to fight to old BD to do the paperwork to block transfer your existing clients to them. Then when the wars start, lawsuits will be filed, and this will suck thousands of hours and dollars out of you again. So one of the most critical decisions of your career is to find a good Broker Dealer the first time. And how to do that is to make them approve ALL of the financial tools you want to use BEFORE you sign anything.

Yes this sucks, but that's life in the Real World. An ounce of prevention is worth a pound of cure. And in this biz, one bad move could literally ruin your life forever, so take the time to interview your BD about financial planning software, BEFORE you sign up!

Below is an incomplete list of most all Broker Dealers. We were going to keep track of which BD approved which software, but we ran into whining lawyers. For example, we called a few and talked with compliance, and then some of them told us, "We'll either look at and approve, or send to FINRA for approval, any financial planning software one of our reps wants to use."

Then we put the text, "They'll try to approve most anything reps want to use" under their BD, and the lawyers made a fuss. One would think this free publicity of being "good BDs" would be welcomed.

The one that made the biggest fuss was one where the Fact Finders, IPS, Seminar, Fee-based agreement, Model Portfolios, and Asset Allocation software were ALL approved before. We know because we used to be a rep with them! It took months going through the whole approval process with them, the SEC, and FINRA. We finally worked all of the bugs out and all of these things were eventually approved. Then they all sailed through two more BDs after that without needing to be sent to FINRA.

So sorry we can't help you figure out which BD approved which financial plan software. So you're going to have to do all of this due diligence yourself BEFORE you sign up (if you want to avoid ruining your life with that decision).

The only advice we can give is that if they tell you they only approve NaviPlan, and Financial Profiles, then you're not going to have the tools to do the jobs, and you're going to end up failing and ruining your life.

The best thing to do these days, is just to go independent and fee-only, and not have anything to do with any Broker Dealer or FINRA at all. If you're good at what you do, you'll learn this the hard way in a year or so anyway, as it's the natural evolution in this business. The financial planning eBook will explain all of this in detail.

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