In the early 1990′s, according to Dalbar, a Boston-based research firm, only about 25,000 people were calling themselves financial planners or financial advisors in the United States. By 2006 that number had grown to over 650,000. Today there are even more.
This is partly because anyone can hang up a shingle and call themselves a financial advisor, financial planner, or one of a thousand different names meant to indicate they can advise you on planning your financial future.
Regulations surrounding financial advisors and investment advisors are minimal at best. For some certifications, there is no education requirement other than passing a licensing exam. Often there are no requirements to demonstrate any investment expertise with practical training.
If you feel like you have a better understanding of financial and investment concepts than your financial advisors…you may be right.
There are a few legitimate certification programs for financial advisors that involve a reasonable amount of training and experience. The best known is the Certified Financial Planner (CFP) designation. There are also several less common certifications. The education and experience needed for a CFP designation should indicate at least a core competency. This is true of a few of the other certifications as well…whether or not they have an investment philosophy that will work best with your goals is a different question.
In 2009, there were around 57,000 Certified Financial Planners in the United States and 17,500 in Canada…the total number of people calling themselves some version of a financial advisor in these two countries was closer to one million. This would make over 900,000 non-CFPs work as financial advisors of one kind or another…90% of the industry.
Just because someone labels him or herself a financial advisor, it does not make them qualified to be one.
As with any industry, there will be individuals who work harder and smarter than others. There will also be those who are more and less honest in their dealings with clients and their money. Unfortunately, there are very few solid government regulations when it comes to financial and investment advisors…they are regulated mostly within their organizations.
Should you use financial advisors? If you can find a good one who thinks outside of the box. If your advisor is giving the same advice as everyone else is in the mainstream financial arena, he or she is likely costing you money.
If you are looking for someone else to make all of your financial decisions for you, there are certainly a lot of financial advisors who’d be happy to comply…but if you decide to adopt this approach, you are asking for trouble. No one will look out for your best interests as well as you do.
The key is to maintain your control over your finances and investments and find the right financial advisors. Those who understand your philosophy and have the skills to help you to reach your goals.