Will the Real Financial Planners Please Stand Up?

When it comes to financial advice, investors have a bewildering array of professionals they could talk to. There are brokers, wealth managers, retirement consultants, personal finance counselors, investment advisers, financial consultants, financial advisors (sometimes spelled with -er), and so on.

Currently, anyone can call themselves a financial planner. That could change.

Photo Illustration for Barron’s Advisor/Dreamstime

They don’t all offer the same services and they may not even be held to the same regulatory standards. One group wants to make it easier for consumers to spot who the real financial planners are.

The Financial Planning Association, a trade organization with more than 19,000 members, is advocating for legal recognition of the term “financial planner.” While now anyone can call themselves a financial planner, with legal recognition, only people who passed a yet-to-be developed set of criteria established by the FPA could use that title.

“For the average consumer, this is about financial wellness,” FPA CEO Patrick D. Mahoney tells Barron’s, adding that investors want to know that the financial professional they hire meets certain criteria aimed at establishing competency and ethics. “If you are engaging with a financial planner who is dedicated to doing what’s best for you, that’s a win for everybody,” he says.

It’s a welcome move among industry insiders. The FPA said 78% of its members support title protection. To Michael Kitces—a financial planning blogger, FPA member, and serial entrepreneur—it’s a matter of truth-in-advertising; if you hold yourself out as a financial planner, you should actually be one.

The FPA says title protection will be a multiyear effort, and necessitate long conversations and lobbying efforts with lawmakers and regulators. Mahoney says that in addition to seeking input from its members, the FPA intends to reach out to others across the industry

“We want to take an inclusive approach and build alliances with different constituencies,” Mahoney says. “We’re willing to work with anyone who will help us advance the profession.”

The FPA says title protection of “financial planner” will provide professional differentiation; establish minimum standards; help consumers get the financial advice they need; and advance the professionalization of the financial planning industry.

In a sense it may be akin to how the medical profession evolved from self-taught amateurs to professionalized services. 

Professional designations in wealth management have proliferated in recent decades as advisors, planners, and insurance salespeople, and many others have sought to better educate themselves and stand out in a crowded field. There are more than 225 such designations, according to the Financial Industry Regulatory Authority, a Wall Street self-regulator. Designations run the gamut from Accredited Estate Planner to Retirement Income Specialist.

The Certified Financial Planner designation is the most popular credential among wealth management professionals. There are currently 93,000 CFPs, according to the CFP Board, a non-profit organization that administers the CFP designation.

Patrick D. Mahoney, CEO of the FPA, says investors want to know that the financial professional they hire meets criteria aimed at establishing competency and ethics.

Photo Illustration by Barron’s Advisor; Courtesy of Financial Planning Association

For the FPA, it’s natural to settle on financial planner as its preferred nomenclature, according to Mahoney. Planning is in the DNA of its members, he says. 

The initiative is also the FPA’s latest under Mahoney, who became chief executive of the association in 2020 following several years of declining membership (it’s since rebounded). Recently, the FPA has added new services, including coaching and education services for its members and chapters. 

The FPA and its members have been discussing title protection for some time, with demand increasing, Mahoney says. The endeavor will take time, but be more than worthwhile for consumers and industry pros.

“We want to elevate the profession so that it is recognized as a noble profession, one that young Americans can aspire to and older Americans can rely on,” Mahoney says.

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