Monitoring Money Managers Lack of Standards Makes It Easy for Anyone to Become a Financial Adviser
Basch, Mark, The Florida Times Union
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
"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
But state regulators across the country are taking action to
ensure that all U.S. financial professionals meet some minimum
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
A standards test may also clear up confusion among consumers
about various professional designations that financial advisers
There are currently 16 associations awarding professional
financial designations, ranging from the well-known Certified
Public Accountant to the more obscure Accredited Asset Management
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. …