While there’s no need to overhaul the regulation of financial planners in the United States, there are consumer protection issues that need attention, concludes a new report from the U.S. Government Accountability Office.

The GAO report examines the oversight of financial planners in the United States, finding that while there is no specific, direct regulation of planners, various laws and regulations apply to most of the services they provide. “The regulatory structure applicable to financial planners covers the great majority of their services, but the attention paid to enforcing existing regulation can vary and certain consumer protection issues remain,” it says.

The issues highlighted in the report include:
> consumers may be unclear about when a financial planner is required to serve their best interests, particularly when they provide multiple services that require different standards of care;
> planners can use various titles that consumers may not understand or be able to distinguish between; and,
> there is a lack of data on the extent of problems related to planners because the U.S. Securities and Exchange Commission generally doesn’t track data on complaints, exam results, or enforcement activities associated with planners specifically.

“A regulatory system should have data to identify risks and problem areas, and given that financial planning is a growing industry that has raised certain consumer protection issues, regulators could benefit from better information on the extent of problems specifically involving financial planning services,” the GAP report says.

The report notes that there are a number of different possible approaches to the regulation of financial planners, including:
> regulating planners as a distinct profession;
> augmenting oversight with a self-regulatory organization;
> extending the fiduciary standard of care; and
> specifying standards for financial planners and the designations that they use.

However, a majority of the regulatory agencies and financial services industry representatives the GAO spoke with did not favour significant structural change to the overall regulation of planners, “because they said existing regulation provides adequate coverage of most financial planning activities”.

The GAO report concludes that “an additional layer of regulation specific to financial planners does not appear to be warranted at this time”.

Instead, the report recommends that insurance regulators assess consumers’ understanding of the standards of care associated with the sale of insurance products; the SEC assess investors’ understanding of financial planners’ titles and designations; and, the SEC collaborate with the states to identify methods to better understand problems associated specifically with the financial planning activities of investment advisors.

IE