Current Issues With Financial Planners

What is a Financial Planner?

A Financial Planner is one who helps manage money and is involved with the overall success in achieving financial needs, goals, and will guide one to a better and more secure retirement. The process of Financial Planning is:

1. Determine financial situation

2. Develop financial goals

3. Identify alternative courses of action

4. Evaluate your alternatives

5. Create and implement your financial plan

6. Review and revise your plan. (1)

Financial Planning Careers

There are a number of financial service careers and two that are growing and critical in the field of finance are becoming a Financial Adviser (FA) and Certified Financial Planner (CFP®). An FA may have some of the same licenses as a CFP®; however, the CFP® will have further knowledge and skills to set the two apart, and the people who want a financial planner that they can trust and know their money is in the right hands will select the more qualified worker. Clients may refer to their wanting a CFP® who is a fiduciary; having the clients needs in front of their own. "Brokers and advisers should be bound by similar fiduciary standards," commented Arthur Levitt Jr., former SEC commissioner (2).

Many financial planners are also registered as investment advisers or hold insurance or securities licenses that allow them to buy or sell products. Ethical financial planners should send you to a more specialized financial adviser for services they cannot provide and should disclose any referrel fees they receive in the process. These advisers should also refer you to a planner if they cannot meet your financial planning needs.

One of the issues of becoming a financial planner is deciding what career choice you would like make. Below is a list of other careers within the financial services sector.

Broker/Dealer

Broker/dealer is a term used to describe an individual or company that is licensed to buy and sell investment products for clients. Some large companies sell securities they own (dealers), while others only buy and sell secuirities for investors (broker).

Chartered Financial Analyst® (CFA®)

CFAs are securities analysts, money managers and investment advisers who have completed the CFA program. CFA® chartered holders are required to commit to high ethical standards just like a CFP®.

Chartered Financial Consultant (ChFC)

ChFCs are financial professionals who have passed The American College's eight course education program, met experience requirements and agreed to the code of ethics.

Fee-Based Financial Adviser

An Adviser who is compensated both by fees paid by the client and commissions that are contingent on the purchase or sale of financial products.

Fee-Only Financial Adviser

An adviser who is compensated solely by the client, with neither the adviser nor any related party receiving compensation that is contingent on the purchase or sale of financial products.

Financial (Securities) Analyst

These are professionals usually employed by investment institutions to conduct research and analyze the value of securities and financial condition of a company, group of companies or industry sector. Based on their analysis, analysts with make investment recommendation to buy, sell or hold a given stock.

Investment Adviser

Investment advisers recommend stocks, bonds, mutual funds, partnerships or other SEC-registered investments for clients.

Personal Finacial Specialist

Certified Public Accounts who wish to specialize in personal financial planning can earn the American Institute of Certified Public Accountant's (AICPA) Personal Financial Specialist (PFS) designation by being a member of the AICPA in good standing and meeting its exam, experience and learning requirements.

Other Miscellaneous Finance Careers

Other careers within the finance sector are accounts, attorneys, estate planning professionals, insurance agents, money managers, portfolio managers, and real estate brokers.

Career Outlook

Employment of financial analysts and personal financial advisors is expected to increase faster than average of all occupations through 2014. Personal financial advisors will benefit more than financial analysts as baby boomers save for retirement and as a generally better educated and wealthier population needs investment advice. People are living longer and must plan for more years in retirement. Globalization of the market will increase also increase the demand for analysts and advisors for financial choices. Analysts and advisors who have earned a professional designation are expected to have the best opportunities (bls.gov).

The Securities and Exchange Commission (SEC) was established to "protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation (3)." The SEC was created in the early 1930s after many investors lost their fortunes in the stock market crash in October of 1929. There are five commissioners in the SEC who are selected by the President, who receives help with the candidates from the U.S. Senate. When the commissioners meet, they discuss securities laws, amend and propose rules. One rule which some Registered Investment Advisers (RIAs) is believed to harm some investors is the "Merrill Lynch" rule, which was approved in April 2005.

The Merrill Lynch Rule

What It Means

The Merrill Lynch rule "allows broker-dealers to offer fee-based investment advice without complying with the fiduciary and disclosure standards of the Investment Advisers Act of 1940 (4)." This means brokers can give investment advice without registering as an investment advisor as long as they offer other brokerage services.

Who It Is Good For

Brokerages that offer services other than investment advice will benefit the most. They can offer fee-based investment accounts without having to register as an investment advisor, even though they may not be qualified to do so. Brokerages are subject to substantial regulation,

...