Are Financial Planners Regulated

Financial planners are not necessarily regulated, but most of them choose to obtain one of a series of legitimate certifications so that they can signal to consumers that they know what they are doing. Also, some financial planners are regulated, depending on what services they provide and who they work for. It’s a complete hodgepodge of laws, regulations, and voluntary actions – and it’s impossible to explain it in a concise article.

I’ll give a few key points. First, anyone can call himself or herself a financial planner. It’s not like calling yourself a doctor, an attorney, nor an electrician. Yup, believe it or not, you could take out a Yellow Pages ad tomorrow and call yourself a financial planner. But you wouldn’t be able to do certain things, like give a person specific advice on investments, unless you do agree to being regulated by the government as a Broker-Dealer, Registered Investment Advisor, or a few other things. So that’s how the regulation works. Anyone can say, “I’m a financial planner,” but only people who are regulated can actually do financial planning. Weird, isn’t it?

If I haven’t lost you yet in the explanation, here are some major differentiation points among major types of financial planners. Many financial planners are Certified Financial Planners (CFP), which means they’ve taken a comprehensive series of courses and passed written tests on financial basics. The tests are pretty tough – not as hard as a CPA exam, but modeled on some of the same principles. So you can feel pretty secure if you work with a financial planner who is a CFP.

Many accountants also act as financial planners these days, and they are usually competent, too. However, their knowledge is usually incomplete, because they have been very well-trained in accounting and taxes, but not necessarily in investments, or insurance, or other things that you might need to know about.

On the other hand, there are Broker-Dealers. There are literally hundreds of thousands of these guys. Many call themselves “financial planners.” These are either independent folks or people who work for big brokerage firms like Merrill Lynch. These guys have to pass certification programs because they are giving you investment advice. The certifications can either be state-level or federal-level. And these investment advisors have oversight from their employers, who are definitely worried about the impact if their guys are incompetent. So, on the one hand, these guys do know what they are doing. But beware of broker-dealers, because they are not giving you honest advice. They work for their employers, and they make big commissions by convincing you to buy investment products from their companies. So even though they are trained, they are not necessarily working for you. They are about as trustworthy as used car salesmen.

So, how do you work through all this confusing stuff? The best way is to find a CFP who works on a “fee only” basis. That is, the financial planner is paid by you, not by commissions. It’s just how a lawyer is paid, if you think about it. The lawyer is paid by you, and he/she is your advocate. Your financial planner should be the same. The best way to find these guys is to go to, which is an association of fee only financial planners.