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No specific regulations oversee financial planners, leaving consumers to rely on a network of state and federal laws to serve as a watchdog. But an analysis by the Government Accountability Office finds that consumer protection issues are falling through the cracks.

The Securities and Exchange Commission, the National Association of Insurance Commissioners (NAIC) and state security departments all regulate financial planners, since the planners typically provide the same services as investment advisers, broker—dealers, and insurance agents.

Possible conflicts of interest exist if a financial planner recommends a product for which they receive a commission or benefit. Consumers may be unaware that their financial planner is required to act with fiduciary duty, which means they must always serve in their best interest of the client. This is especially confusing to investors when the adviser provides additional services, like insurance products, where they are not required to act in the best interest of the client.

Another concern is the ambiguity of titles and designations used by financial planners. Some titles include financial planner, consultant, adviser or wealth manager. A 2008 survey showed even experienced investors were confused by the variety of titles. The titles “range from those with rigorous competency, practice, and ethical standards and enforcement to those that can be obtained with minimal effort and no ongoing evaluation,” the report said.

The extent of problems is unknown because the SEC does not track complaints, inspections and enforcement actions specific to financial planning services. The ability of regulators to provide oversight is limited due to this lack of information.

As more people take responsibility for their retirement savings, the financial planning industry is expected to grow. Between 2000 and 2008, the number of financial planners increased from 94,000 to 208,400.

The Dodd—Frank Act will increase the number of financial firms that state security departments must oversee, decreasing the workload for the SEC but possibly weakening the amount of oversight that states are able to provide.

FAST FACT: Financial planners are used by 22 percent of households for investment decisions and by 12 percent of households for credit or borrowing decisions.

Following are other new watchdog reports released by the Government Accountability Office (GAO), various federal Offices of Inspector General (OIG), and other government entities.


  • Fraud prevention and enforcement efforts in government—provided health care recovered $4 billion in 2010. New rules authorized by the Affordable Care Act helped to prevent fraud in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). (Department of Health and Human Services)


  • A nonprofit in Silver City, N.M. misused $17,000 in stimulus money to renovate its own office. Gila National Forest received $643,000 for trail maintenance and the nonprofit organization was in charge of implementing trial improvements. (USDA Inspector General)

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