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REGULATING FINANCIAL PLANNERS

Published by sam - 10/11/07 - 05:11:13 am

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Despite the phenomenal growth of financial planning services and the enormous influence that planners can exert over the investment of their clients resources, there is virtually no regulation of the industry or any uniform system of earning credentials.  Indeed, there is no agreement about either the functions of a planner or the training needed to perform them responsibly.

 As concerns mounts about the growth of the industry in both size and influence, a number of governmental and private groups— Congress, the Securities and Exchange Commission, and some industry organizations—are looking at ways of regulating it with a view to protecting the clients.  Thus far, however, no governmental regulations seems to be forthcoming.  One of the two major industry associations favors a policy of self policing by SROs—Self-Regulatory Organizations; the other apparently believes that enforcement of existing state laws will suffice.

 The International Association of Financial Planning has drawn up a proposal that would define the terms financial planner, financial planning, and financial planning professional and establish a self regulatory program.  Meanwhile, it has established and establish a 500 of its 25,000 members who have met six quality control tests.  (The register is available free from the International Association of Financial Planning, 2 Concourse Parkway, Atlanta, Georgia 30328).  Another organization, the Institute for certified Financial Planners, regards this proposal as too strict and instead favors regulation at the state level through stronger enforcement of existing investment adviser laws.

 Meanwhile, the professional preparation of financial planners leaves much to be desired, especially when compared to the far more rigorous preparation of lawyers and accountants.  The Institute for Certified Financial Planners awards the title of Certified Financial Planners to anyone completing the series courses at the upper undergraduate level—offered by the College for financial planning in Denver.   The American College, in Bryn Mawr, Pennsylvania, offers the title of Chartered Financial Consultant to those who complete its series of courses.  Whether training of this sort equips a planner to cope with any but the simplest planning issues is an open question, and many potential clients who have completed the exercise in this chapter may find sounder and less biased advise from an accountant or an attorney experienced in financial matters.

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