Monitoring Money Managers Lack of Standards Makes It Easy for Anyone to Become a Financial Adviser

Article excerpt

If you're looking for financial advice, there are lots of places

to turn. You can read financial publications, watch financial

television shows or seek personal advice from the estimated

150,000 professional financial advisers in the United States.

The problem is, how do you know the person giving you advice

knows what he or she is talking about? Although financial

advisers are required to be licensed, in many cases the advisers

don't have to demonstrate any competency in order to get the

license.

"I think, without question, it is more difficult to become a

licensed beautician than a licensed professional financial

planner or financial adviser," said Mark Griffin, president of

the North American Securities Administrators Association, a

coalition of state securities regulators.

There are designations such as Certified Financial Planner, or

CFP, that are earned through stringent educational and testing

requirements. But some professional advisers go through no

testing at all.

For example, to register with the federal Securities and

Exchange Commission as an investment adviser, all you have to do

is send in a form that basically assures the government that you

have never committed any securities violations. There isn't even

a fee required.

"The federal level has basically concluded, that's not our

job" to test financial advisers for competency, said Robert P.

Goss, executive director of the Certified Financial Planner Board

of Standards in Denver, Colo.

Don Saxon, director of the Florida Division of Securities,

said investment advisers in Florida do have to take a test that

demonstrates knowledge of financial markets in order to get a

license.

But state regulators across the country are taking action to

ensure that all U.S. financial professionals meet some minimum

standards.

The North American Securities Administrators Association is

working on a standardized competency examination that would be

administered individually by each state, but would ensure that

all financial professionals meet some minimum standard before

giving out financial advice.

Griffin, who is also director of Utah's securities division,

said he hopes this testing system will be in place a year from

now. "We feel there needs to be a floor" level of competency, he

said.

A standards test may also clear up confusion among consumers

about various professional designations that financial advisers

carry.

There are currently 16 associations awarding professional

financial designations, ranging from the well-known Certified

Public Accountant to the more obscure Accredited Asset Management

Specialist.

Those associations require members to pass tests to earn the

designations, but consumers generally have no idea about the

difficulty of those tests. A government-administered exam would

give consumers a better basis for judging their financial

adviser's competency. …

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