It's a matter of trust. Americans worry about their money and wonder exactly whom they can trust with it.
With about a half-million stockbrokers and 100,000 financial planners doing business in this country, finding the trustworthy isn't always easy.
Sometimes steps must be taken to make sure professionals remain on the up-and-up:
* In the brokerage industry, Prudential Securities has agreed to pay $371 million to settle charges that it defrauded 400,000 investors. Most of the money will go to individual investors who can prove they received false promises or were cheated. Specific examples of what occurred include sales of risky real estate and energy partnerships, incorrect claims in some promotional literature and churned accounts.
* In regard to financial planners, the Investment Adviser Oversight Act of 1993 has been approved in Senate committee and sent to the Senate floor. The bill requires an annual registration fee for planners, with proceeds to be used for greater regulation. Improved disclosure to clients and a fidelity bond requirement are included. If approved by the Senate, this and a similar bill passed by the House go to conference committee, where differences will be worked out.
Obviously, it always pays to be vigilant with your money. As this column has often pointed out, if you feel you need investment help, shop carefully for someone who'll do the job you expect. Get recommendations from friends and associates and meet with several professionals. Find out credentials and investment philosophy.
Request client references and determine the size of commissions. The National Association of Securities Dealers (P.O. Box 9401, Gaithersburg, Md. 20898) will provide information on disciplinary action against a broker by its own regulators, the Securities and Exchange Commission and the stock exchanges.
The problem in assessing financial planners -- which has spawned the federal action -- is that anyone can call himself a financial planner.
A planner may be a broker, accountant, lawyer, insurance agent, banker or a one-product salesman. Some are fee-only planners. Others sell products and should make this clear at the outset. They may or may not hold professional designations.
"Though a planner may tout he's registered as an investment adviser under the Investment Advisers Act of 1940, it isn't a qualitative stampof approval," warned Barry Barbash, director of the division of investment management for the SEC, which has 19,000 registered investment advisers on its rolls. "It doesn't say anything about knowledge or professional standards."
Yet until regulations are increased, it's worth checking.
"Make sure the planner is in compliance with rules and regulations, checking with the SEC to see that he's registered, ,, or, if he's licensed to sell securities, checking with the NASD," counseled Dale Brown, director of government affairs for the International Association for Financial Planning in Atlanta.
If a financial planner isn't willing to sit down for an hour for a free initial consultation, be wary, added Brown. You can check with the IAFP at (800) 945-IAFP to find out whether the planner is in good standing with the organization. In addition, most states have some laws governing planners.
"About 27,000 planners hold the certified financial planner (CFP) designation," said Robert Goss, executive director of the International Board of Standards and Practices for Certified Financial Planners Inc., a Denver organization that certifies planners.
"We'll respond to a request from a client about whether a planner is licensed with us and if there's been disciplinary action."
Besides the CFP designation, which is awarded upon completion of courses and an examination, there's a chartered financial consultant designation from American College in Bryn Mawr, Pa.
"While there are planner certification programs, there must be some basic training in the major areas and greater regulation at the state level," said Laura Polacheck, senior analyst for the Public Policy Institute of the American Association of Retired Persons, who helped put together a report that emphasized a need to regulate planners.
The biggest mistake investors make is relying on the personality of the planner, trusting him simply because he's friendly and willing to chat, she said.