One could argue that beauticians and plumbers must comply with more rigorous regulation than financial planners, as the Financial Planning Coalition has suggested.
Beauticians and plumbers may not have to report to the Financial Industry Regulatory Authority or the Securities and Exchange Commission, but the coalition illustrates, in new research and analysis released Monday, a lack of appropriate regulatory standards for those who hold themselves out as "financial planners."
"The current piecemeal approach to the regulation of financial planners only protects consumers in limited circumstances – the narrowly focused areas of advice, such as investments, securities or insurance services, and for limited time periods," said Robert Gerstemeier, chairman of the board of directors for the National Association of Personal Financial Advisors (NAPFA), in a telephone press conference Monday morning. "There are no uniform regulatory standards, including requiring basic competency, education and ethics standards, for those offering financial planning advice."
According to the research, nearly "one-third of consumers who worked with an advisor on a financial plan did not receive the financial planning services they were seeking." They found that 31% received two or fewer services as part of their financial plan, 30% believed they did not get the services they needed, and 27% wanted a financial plan but did not get one.
As Gerstemeier said, "The conflicting standards that are applied to the various components of financial planning allow financial service providers to recommend products and services most advantageous to them and not in the best interest for their consumers."
There is also, the research found, considerable disconnect and confusion about the various titles associated with financial planning.
The research found that 82% of consumers believe that a financial planner is the same as a "financial advisor," 70% believe a financial planner is the same as a "wealth manager," and 68% believe a financial planner is the same as an "investment advisor."
"This is particularly distressing to my colleagues and me," Gerstemeier said. "We are longtime practitioners in the field of financial planning who have sought to fulfill the highest standards in our profession, where the goal is always clearly communicated with consumers and putting our clients best interest first."
The Coalition – comprising the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and NAPFA – has remained committed to lobbying for more regulation of financial planners, despite a Government Accountability Office report issued in 2011 saying more regulation was unnecessary. As Janet A. Stanzak, president of the FPA board of directors, said during the conference call, the coalition's research is very much a response to the GAO's study.
