Investments, Personal finance

Financial Planners: Clarifying Their Role

Financial planning is a growing industry, and it needs a regulatory system. That’s according to the U.S. Government Accountability study entitled “Consumer Finance: Regulatory Coverage Generally Exists for Financial Planners but Consumer Protection Issues Remain.” It found “no specific, direct regulations” of financial planners exist at the federal or state level.

jscreationzs /

Vague regulations have left consumers confused about what financial planners do and the rules that apply to them according to The Financial Planning Coalition, a consumer watchdog group consisting of 75,000 stakeholders. It pointed to a survey, commissioned by the Financial Planning Association, indicating that 83% of voters questioned wanted increased regulation of professionals who referred to themselves as “financial planners.”

“While the GAO study did not reach the conclusion we advocated,” said Charles A. Moran, CFP, 2011 Chair of the Board of Directors of the Certified Financial Planner Board of Standards, Inc. in a news release, “it recognized significant consumer protection issues and outlined steps to address them. The study will help inform our ongoing discussions with policymakers and will provide an important building block in our efforts to achieve recognition of the rapidly growing financial planning profession.”

Although the regulatory structure available covers most of these planners’ services, the “attention paid to enforcing existing regulation varies” and consumer issues can arise, according to the U.S. Government Accountability Office report “Consumer Finance: Regulatory Coverage Generally Exists for Financial Planner, but Consumer Protection Issues Remain.”

These consumer issues include uncertainty about when a financial planner is required to serve the clients’ best interests and the inability to decipher or understand the numerous titles and designations financial planners may adopt.

However, the extent of the problem is unclear because the Securities and Exchange Commission doesn’t record data on complaints, examination results and enforcement activities relative to financial planners.

The report suggests identifying risk and problem areas is needed and would be beneficial to planners themselves for identifying problems stemming from financial planning services.

Stakeholders proposed different avenues to address the regulation, according to the report, such as developing a federally chartered board overseeing financial planners as a distinct profession, beefing up oversight of investment advisers’ regulatory organizations, broadening the reasonable standard of care to more financial services, and identifying standards for financial planners and the designations they use.

However, adding changes to the current structure isn’t necessary, according to the regulatory agencies and financial services industry representatives questioned in the release. What exists is adequate for most financial planning activities, they claimed.

The report encouraged more discussion on the issue.

What trends are you seeing in this field?

Photo Credit: jscreationzs / (

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