So You Say You're A Financial Planner? Let Me See a License!
IN hiring a financial planner, the rule has always been simple: Choose carefully.
The reason, not well known, is that no state or federal laws require financial planners to be licensed. Just about any person who wants to can legally call himself a financial planner.
Regulations do exist requiring state and federal registration for individuals selling securities and other financial instruments.
Now, one of the most prominent national groups for financial planners, a professional regulatory body based in Denver, is taking new steps to help consumers distinguish licensees whom it has approved from noncertified planners.
Several weeks ago, this board changed its name - from the International Board of Standards and Practices for Certified Financial Planners Inc. - to the Certified Financial Planner Board of Standards Inc. The name change was ``designed to make more people aware'' of the professionalism involved in being a financial planner, says John Blankinship, president of the CFP Board. The board also created a new certification trademark - a stylized flame and the initials CFP, which a certified planner can use on business cards and letters. The initials, Mr. Blankinship says, enable consumers to identify the 28,000 individuals who have met the tough regulatory standards of the CFP Board.
Financial experts say such steps by professional self-policing groups are essential. The world of financial planning is a maze of acronyms, professional groups, trade associations, and educational organizations. Professional membership groups include: International Association for Financial Planning (IAFP); Institute of Certified Financial Planners; College for Financial Planning; and National Association of Personal Financial Advisors.
While there is no national organization that oversees all financial planners in the US, most professionals estimate that there are at least 250,000 planners. ``Our numbers are growing,'' says Jennifer Huetter, a spokeswoman for the IAFP in Atlanta. ``A lot of financial planners left the field in the mid-to-late 1980s, following changes in federal tax laws. But more people have been becoming financial planners in recent years.''
Unlike many groups, the CFP Board requires ``licensing'' of its members and provides a disciplinary process for violations of standards. Thus, to use the CFP designation, an individual must be approved by the CFP board.
Requirements are fourfold, according to Diana Stotler, a board spokeswoman. Among them: An individual must have a bachelor's degree or more than five years of financial planning-related experience; applicants have to pass a rigorous two-day, 10-hour comprehensive exam on a broad array of financial issues, such as insurance, income tax laws, employee benefits planning, and risk management; applicants must also provide proof of work experience in the financial planning area.
Members must sign a disclosure statement revealing areas of potential concern, such as past or pending litigation against the planner. A member can be dropped from membership if the CFP Board feels that there has been a lapse of ethical conduct.
To obtain CFA certification, a person must pay an annual $45 licensing fee, plus $450 for the 10-hour examination. Licensees must also meet biennial post-certification requirements.
The IAFP currently lists 11,500 members. The IAFP will not refer its members to consumers unless they meet ``all appropriate and existing'' legal requirements, such as registration requirements involving the sale of securities, says Dale Brown, the group's director of government affairs.