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Source link: http://archive.mises.org/15370/gao-financial-planners-dont-need-more-regulating/

GAO: Financial Planners Don’t Need More Regulating

January 19, 2011 by

The Government Accountability Office has come to the conclusion that financial planners don’t need any more rules and regulations than they have now.

“While no single law governs the broad array of activities in which financial planners may engage, given available information, it does not appear that an additional layer of regulation specific to financial planners is warranted at this time,” according to the study.

One would think that CFPs would be popping champagne corks and celebrating. But of course no, instead, “Members of the Financial Planning Coalition––a group comprised of the Certified Financial Planner Board of Standards, Financial Planning Association and the National Association of Personal Financial Advisors––have been advocating that financial planners be regulated as a distinct profession with fiduciary responsibility overseen by an oversight board under the auspices of the SEC.”

Someone who is going to make a living telling people what to do with their money better be vetted by the government and regulated on an on-going basis to, you know, protect us from shysters out there claiming they know how to develop a financial plan but don’t really know.

Writing for MarketWatch, Chuck Jaffe says “It’s official; your financial adviser, broker or ‘wealth adviser’ is not a professional.” Because, after all, if there are no government standardized requirements that must be obtained in order to call yourself a financial planner, then how can the consumer know if he’s dealing with a pro?

“Technically, a ‘profession’ requires some type of specialized schooling and education, plus standards that a practitioner must pass in order to enter the field,’ writes Jaffe. “Thus, a lawyer can’t practice without passing the bar exam, and that doctor must go to med school and amass experience in order to get their license.”

However, certifications and licensing are just government constructs created to impose barriers to entry in order serving to exclude competition. There is no benefit to consumers. “Occupational licensing has either no impact or even a negative impact on the quality of services provided to customers by members of the regulated occupation. Additionally, as occupations become licensed, members of regulated occupations see their earnings go up,” explains Morris Kleiner.

So don’t look for the Financial Planning Coalition to give up. Ron Rhoades, an advisor who sits on the FPC’s leadership council, called the GAO report one in a “series of stepping stones” toward making financial planning a profession.


J. Murray January 19, 2011 at 4:45 pm

Even if they somehow turn “professional”, it won’t change the fact that they’ll still be just as effective as randomly tossing darts at a listing of stock quotes to buy and sell.

Bogart January 19, 2011 at 5:37 pm

I guess that I am not an IT Professional or Computer Programmer or Systems Analyst, etc because some bureaucrat has not said so. I guess I should start looking for another job in one of the two professions approved by a bureaucrat so far in my career: unemployed and military officer. :-(

J. Murray January 19, 2011 at 5:49 pm

Don’t fret, the rest of us dirty amateurs are in the same boat.

Matthew Swaringen January 19, 2011 at 10:25 pm

Same deal here. It’s so terrible to find out I’m unprofessional :P

HL January 19, 2011 at 7:36 pm

Trying to find a financial planner who is not a shyster and huckster is like looking for virtuous woman in a whorehouse.

Lola January 24, 2011 at 6:51 am

Now hang on a minute. I am a ‘financial planner’ – but I only learned that was what I was doing when the ‘financial planning institutions’ told me that was what I was doing. I wasn’t a ‘qualified financial planner’ and I am still resisting that thought controlling process. And, I reckon I try and do a good job. Basically I ‘adjust the information assymetry’ between the State, the financial institions and the economics, and the client. I am UK based but I have met several US FP’s who are not all corrupt of hucksters.

Jim January 19, 2011 at 10:14 pm

Why can’t my Chartered Retirement Planning Counselor (CRPC) designation, university degree, and experience demonstrate my proficiency? Please, no more regulations. They already have it so that I can’t go a day without breaking a dozen rules.

To the comments above, we do a lot more than pick stocks. In fact, I wouldn’t trust a stock picking advisor, as becoming halfway decent at picking individual securities takes tons of time. If the advisor is doing his/her job, they don’t have the time to become expert stock-pickers. I’ll stick with funds.

Bogart January 20, 2011 at 9:23 am

Jim: You should be thrilled. These certifications are simply mechanisms to limit competition. After you limit competition then these boards will consolidate to form one lobbying organization with the Feds. At that point you can ring the register. You will now have power to tell individuals how they can manage their money even if they choose to do so differently simply by having legislators insert little paragraphs into the thousands of pages of bills.Granted as a professional who has to beat the competition and provided value to customers you will be castrated on that end. But it is free money!!!!!!! What was the old show: Mo Money. They just had it wrong when dealing with the government that is all.

Lola January 24, 2011 at 6:52 am

Foget funds. Just asset allocate.

Wood January 20, 2011 at 12:09 pm

Cool, money doctors.

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