Once upon a time, 15 years ago, there was no such thing as a financial planner. Then the floodgates opened. These days, about 250,000 Americans call themselves planners.
The "certified financial planner" designation is given by the Institute of Certified Financial Planners in Denver on completion of a self-study course and examination.A "chartered financial consultant" designation is granted by the American College in Bryn Mawr, Pa.
There are other programs. There are even easier ways to become a financial planner: you simply call yourself one, or your company prints it on your business cards.
Understandably, due to this uncontrolled flood of planners, various factions of the profession often bicker. Planners with even the same designations inevitably disagree about investments.
In addition, attorneys, accountants or various types of brokers with no special designations may provide all the planning that some clients require.
There are excellent, mediocre and poor planners. Controversy has heated up recently as the profession argues the benefits of uniform standards of conduct.
A proposal by the International Board of Standards and Practices for Certified Planners, being discussed at planner meetings around the country, asks planners:
- Whether they should be required to disclose how much compensation they will receive if clients buy the products they recommend.
- Whether they should give full disclosure of potential conflicts of interest appropriate to a fiduciary relationship.
- Whether they should meet continuing education requirements.
- Whether they should comply with agreed-upon appropriate financial procedures.
Some chafe at these suggestions, particularly the stating of commissions, since they believe other groups such as insurance agents don't have to do so. On the other hand, some planners think it's time to be more straightforward.
"The government and individual states should license financial planners just as they license doctors, lawyers and accountants," said Jack Blankinship of Del Mar, Calif., chairman of the practice standards committee of the IBSP.
Some favor a less direct approach.
"We do not have an official position on the issue of disclosure for financial planners, but instead have focused upon our own code of ethics and professional practice guidelines," said Burke Christensen, vice president of the American Society of CLU & ChFC in Bryn Mawr. "While we do not have a standard that says you ought to disclose commissions, our standards say that whatever is in the client's interest needs to be taken first."
Some critics argue the government must handle regulation, while others believe the industry should do so. Others think something should be done, but aren't adamant about who handles it.
Readers of this column know I feel strongly that investors should shop carefully for any financial service. Examine credentials and philosophy of the professional in question. Gain an understanding of all fees and commissions.
Planners who sell financial products should explain this up-front, so you can determine whether products have a bearing on the plan. The plan itself must be easy to understand with clear recommendations, including factors such as income, net worth, portfolio, insurance, loans and taxes.
Much of the responsibility is the investor's. However, those who call themselves planners won't be taken seriously as professionals until they begin to exhibit considerably greater unanimity in both purpose and professionalism.