1. Archive

Financial planners seek an identity

Financial planners are taking a calculated risk. Their own regulatory board is attempting to define just what they should be doing, and then to hold them accountable for doing it.

The goal is to produce a set of accepted standards for practicing financial planning, even though it undoubtedly will become a legal weapon in the hands of investors whose financial plans go awry.

"Right now there is no agreed-upon definition of what a financial planner does," said John T. Blankinship Jr., president of the Certified Financial Planner Board of Standards. "If you get into a court of law, there are some standards you will be held to anyway, so we might as well write them down."

While anyone can call himself or herself a financial planner, the board determines who can use the designation certified financial planner, or CFP. Currently about 20,000 practicing planners have that right.

They have to meet education and experience requirements, pass a two-day test and agree to comply with a code of ethics. But as long as they obey the law, the board has not tried to tell them how to do their jobs.

The result is a lot of diversity in approach. Some planners are insuranceagents who find an insurance product to meet every client's needs. Some are stockbrokers whose main objective is selling stocks, bonds and mutual funds. Some are accountants who don't recommend specific investments. And some are none of the above.

"Financial planning is a process, not a product delivery system," said Blankinship, a California CFP who was in the Tampa Bay area Friday. He said he believes it is possible to set accepted standards for steps in that process, just as the medical profession has developed accepted standards of treatment for specific diseases.

A board committee will be working on the standards most of next year, and Blankinship said it could be finished by fall.

One resource the committee will be using is a recent survey of CFPs that asked how they go about their jobs and what tasks they consider most important. The CFPs gave the top ranking to gathering information about their clients, especially determining goals and objectives. The survey also found that more CFPs are involved in retirement planning and tax planning than in the past.

One area still evolving is how planners are compensated. Most _ 53 percent _ collect both fees and commissions, with 19 percent working for commissions only and 19 percent working for fees only. The rest are salaried.

What do financial planners do?

Here's how they answer that question:

1. Establish a relationship with a client.

This includes explaining the services to be provided.

2. Gather information about a client.

This means asking lots of nosy questions about finances and

helping define goals and tolerance for risk.

3. Analyze and evaluate a client's financial status.

This may require probing deeper, asking about special needs,

tax strategies and estate planning.

4. Develop and present a financial plan.

The plan should be tailored to a client's specific needs and

thoroughly explained.

5. Help implement the plan.

Often the planner will work with other professionals such as

lawyers and stockbrokers.

6. Monitor the plan.

A plan needs to be reviewed and revised periodically to be

sure it fits tax laws, economic circumstances and a client's

changing needs.

Source: Certified Financial Planner Board of Standards