For the last year, these and other questions have been the subject of debate among planners, their industry groups, the federal Securities and Exchange Commission and state and federal legislators. Among the key issues are whether financial planners should be regulated and, if so, by whom.
But while that debate continues, some within the industry say the answer may be in setting up fee-only plans.
"We feel that we're the coming thing in the industry," said Mary A. Malgoire, a spokeswoman for the National Association of Personal Financial Planners, an Arlington Heights, Ill., group of fee-only planners.
Malgoire said that fee-only planners guarantee impartiality for consumers
because they reap no profits from commissions and thus have no vested interest in any specific financial vehicle. Her group uses the term "fee-only" to distinguish itself from "fee-based," a category that can include planners who charge a set fee but also receive commissions.
Fee-only financial planners are beginning to catch on with consumers, Malgoire said. And her group, she added, has grown to 160 members in a little more than three years.
Alexandra Armstrong, a spokeswoman for the International Association for
Financial Planning, said her group has also detected an uptick in the popularity of fee-based financial planners. With some 25,000 members, the Atlanta-based association is the industry's largest organization.
"Fee-only seems to be on the increase," she said, "but it's still on a very small base." Armstrong estimated that only about 15 percent of the nation's estimated 200,000 to 300,000 financial planners operate on the fee- only system.
Armstrong and other industry experts also pointed out that fee-only
financial planning has one major drawback: It can be too expensive for consumers with limited portfolios. According to Malgoire, fee-only planners charge from $40 to $250 an hour, although some also charge a flat fee or work off a percentage of the customer's income.
And fee-only is nothing new to many planners. Financial planners at accounting firms, for example, have used the system for years because of the long tradition of fee-based accounting services.
"The trick is to match your financial needs with the service you want to get," said Jane Scaccetti, a tax partner at the Philadelphia office of Laventhol & Horwath. "If you don't have all that much money to worry about, why pay for the services of an expensive fee-only planner?
"And on the other hand, if you're the head of an entrepreneurial company, why go to an investment-based planner? What you need is ongoing advice over a wide range of options."
Most financial-planning experts agree, though, that public concerns over the financial-planning industry are mounting. Consumers in several states have either lost their money or been badly burned financially by unqualified planners, and pressure for industrywide regulation is building.
"The problem is that the public doesn't know what to expect," said Armstrong. "Right now anyone can hang up a sign and call themselves a
financial planner. There is no real licensing and regulation."
Armstrong said her group favors the creation of a self-regulating industry group, which would, in turn, be monitored by a federal agency. Such a situation would be comparable to the Securities and Exchange Commission's current oversight of the over-the-counter stock market.
The Institute of Certified Financial Planners in Denver, however, believes that the industry can be better regulated through existing state and federal laws. The institute has some 11,000 members.
In the meantime, industry observers said consumers should look for the following accreditations when they shop for a financial planner:
* The Certified Financial Planner (CFP), a designation conferred by the
College for Financial Planning in Denver.
* The Registry of Financial Planning Practitioners, a listing which requires three years of experience before application and includes a comprehensive exam.
* The Chartered Financial Consultant (ChFC), a degree conferred by American
College in Bryn Mawr.