Knowing who regulates and oversees financial advisers helps ensure you’re working with a professional who is not only competent but also adheres to high ethical standards. In the United States, multiple regulatory bodies and professional organizations play critical roles in supervising and providing information on financial advisers.
Government Regulators
Several government agencies oversee the activities and ethical standards of financial advisers:
- The Securities and Exchange Commission (SEC): The SEC plays a central role in regulating financial advisers, especially those managing $110 million in assets or more. They ensure these advisers adhere to securities laws designed to protect investors.
- The Financial Industry Regulatory Authority (FINRA): Formerly known as the National Association of Securities Dealers (NASD), FINRA regulates broker-dealers and their agents. It enforces rules governing the sale of securities, the professional conduct of its members, and it helps protect investors from fraudulent practices.
- The Commodities Futures Trading Commission (CFTC): The CFTC regulates the trading of commodity futures and options, ensuring financial stability and consumer protection against abuse, fraud, and manipulation in the derivatives markets.
- The North American Securities Administrators Association (NASAA): This organization consists of securities regulators from U.S. states and Canadian provinces. NASAA focuses on protecting investors who purchase securities or investment advice at the state level.
Each of these agencies maintains databases to track disciplinary actions taken against financial advisers, providing an essential resource for consumers seeking to verify the credibility and integrity of potential advisers.
Professional, Trade, and Private Organizations
Alongside government bodies, several professional and trade organizations offer resources to help consumers choose qualified financial advisers:
- The Institute of Certified Financial Planners (ICFP): Provides background information on Certified Financial Planners (CFP) in your area. Each CFP has met rigorous requirements related to education, examination, experience, and ethics.
- The International Association for Financial Planning (IAFP): Offers a list of financial planners by geographic area and membership in this trade group, ensuring adherence to certain professional standards.
- The National Association of Personal Financial Advisors (NAPFA): Focuses on fee-only financial planners, providing names of advisers who are compensated solely through client fees rather than commissions from financial products.
- The American Institute of Certified Public Accountants (AICPA): Offers a designation for CPAs who specialize in financial planning, known as Personal Financial Specialists (PFS). This designation ensures that the CPA has additional expertise in financial planning.
How to Use These Resources
When selecting a financial adviser, it’s wise to start by checking their registration and disciplinary history through government and trade association databases. You can also use the resources provided by professional organizations to find qualified advisers in your area.
Contacting these organizations can provide you with lists of potential advisers, background checks, and additional tips for making an informed decision. Here are some contacts to get you started:
- Institute of Certified Financial Planners: 1-800-282-7526
- International Association for Financial Planning: 1-800-945-4237
- National Association of Personal Financial Advisors: 1-888-333-6659
- American Institute of Certified Public Accountants: 1-800-862-4272
Conclusion
Choosing a financial adviser is a significant decision that impacts your financial future. Understanding the regulatory landscape and utilizing the resources available from professional organizations can help ensure that you engage a qualified, reliable adviser. Always perform thorough due diligence by checking credentials, regulatory history, and the adviser’s approach to client relationships and financial planning.
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