The public is confused about what a financial planner is and they have no assurance that the planner they hire is acting in an ethical manner, says the Financial Planning Coalition.
The coalition, made up of Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors, says there are insufficient regulations for financial planners and members of the public are the ones being hurt because of it.
Many people claiming to be financial planners provide narrowly focused advice, single-product solutions, or advice that is not in the consumers’ best interest, the coalition announced at a press conference Monday, and therefore they are not true financial planners.
Three years ago, the Government Accountability Office after a brief study concluded that no additional regulations were necessary for financial planners. However, the coalition says the GAO was not given sufficient time to study the situation.
“Now, however, combining our research with an analysis of industry data not available in 2011, it becomes clear that common sense regulatory standards for financial planners are needed to protect consumers,” the coalition said in a press release.
Significant consumer confusion exists about the various titles associated with financial planning, the coalition says. The research shows that 82 percent of consumers believe that a financial planner is the same as a financial advisor; 70 percent believe a financial planner is the same as a wealth manager, and 68 percent believe a financial planner is the same as an investment advisor.
The coalition conducted a study of 1,250 consumers age 25 or older who contribute to decisions about finances and who have a household income of $50,000 or more. The number included 496 who worked with a financial advisor within the last five years.
The survey shows that about one-third of the respondents who hired a financial planner believe they did not get the services they needed, or they wanted a financial plan but did not get one.
Consumers are also being misled by advisors who identify themselves as holistic financial planners when they actually provide more restricted services, says the coalition. Many advisors feel the use of the term financial planner increases their business, even if they do not provide complete financial planning services, says the coalition.
The coalition is touting the CFP designation as one assurance the people can have that they are receiving advice from an educated financial planner who adheres to ethical standards. The research was conducted and the press conference was held to raise public awareness of the need for more regulation of the profession, says Ray Ferrara, chairman of the Board of Directors of the CFP Board.