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Financial Planners: What Are They and Who Is Regulating Them?

Investors are confronted with a variety of professional designations for people in the financial services industry, but it can be difficult for the average investor to understand and appreciate the wide distinctions between them.  One particular designation that implies specialized skill might mean much less than you think.

financial planner prepares financial plans for clients. It requires no license, no experience, no qualifications, and is subject to no regulatory oversight.  The kinds of services financial planners offer can vary widely and can include every aspect of your financial life, including savings, investments, insurance, taxes, retirement, and estate planning.

Unlike other financial services professions, such as stockbrokers, investment advisers, and insurance agents, the financial planning profession does not have its own regulator.  Instead, individuals who call themselves financial planners might be regulated in relation to other services they provide.  For example, an accountant who prepares financial plans would be regulated by the state Board of Accountancy, and a financial planner who is also an investment adviser would be regulated by the SEC.

It is important to make certain you fully understand which areas of your financial life a particular planner can—and cannot—help with before you hire that person.  If a financial planner sell products, their recommendations typically will correspond with the products or services they sell and may not offer an actual comprehensive view of your financial options.  For example, an insurance agent will tell you about insurance products (such as life insurance and annuities) but likely will not discuss other investment choices (such as stocks, bonds or mutual funds).

If a financial planner is simply a financial planner, he or she flies under the radar of any regulatory body tasked with protecting the public.  Given the importance of financial planning to the well-being of millions of people, appropriate regulations are needed to require financial planners to meet ethical and competency standards.

Looking for a “Certified Financial Planner,” or CFP, may help locate a financial professional who has at least met certain educational and experience criteria and has passed an exam.  Additionally, a professional who is also a licensed stockbroker or investment adviser will at least assure you that he or she is subject to some regulatory oversight.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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