When Denver’s popular KOA-AM talk show host Mike Rosen revealed last February that he had lost a seven-figure sum through his financial planning firm, The Denver Post covered the story. Unfortunately, the Boulder-based Agile Group had invested Mr. Rosen’s funds in financial products offered by Bernie Madoff, whose elaborate Ponzi scheme caused thousands of people across the country to lose staggering sums of money. Up until the day he discovered that the group had been investing his money in Madoff funds, Mr. Rosen had been pleased with the performance of his financial planner, even promoting the firm regularly on his daily radio show.
New laws under consideration by Congress would protect Americans like Mr. Rosen from abuses by those claiming to be financial planners in the future. Colorado Senator Michael Bennet, a member of the Senate Banking Committee, will play a key role in writing the new laws.
Sadly, Mr. Rosen is far from being the only victim of incompetent investments by financial planners. According to a recent survey of more than 3,000 financial planners nationwide, conducted by Certified Financial Planner Board of Standards, nearly 60% of the respondents were aware of specific cases of financial abuse of their clients or other consumers. The cases they cited demonstrate that the elderly are by far the most common victims of unsuitable or deceitful financial advice.
Bad advice has resulted in millions of dollars evaporated out of savings accounts, retirement funds and college savings. In many of these highly avoidable cases, so-called financial planners lacked the qualifications and ethical training needed to provide skilled investment guidance. In other cases, the advisers simply took advantage of vulnerable victims like the elderly and the disabled.
Many Coloradans would be surprised to discover that the financial planning profession lacks the regulations, competency criteria and ethical standards that govern other professions, like law and accounting. This regulatory loophole allows unscrupulous individuals to use the title financial planner and provide financial advice – no matter how outrageous or contrary to the interest of the client – with hardly any consequences when their advice proves bogus. Often, the victims of these scams have no idea that what they are signing will cause them to lose money. And frequently, the victims of the scams are unable to recover their losses.
As Congress debates financial reform legislation, the Senate Banking Committee – of which Sen. Bennet is a member – is considering measures that would protect American consumers by holding financial planners accountable for their actions. The new laws would establish basic regulations for the financial planning profession, creating an independent oversight board responsible for establishing industry-wide standards. The board would require financial planners to pass a competency examination and meet ethical standards, and would have the power to discipline those who fail to meet these requirements.
According to a recent study commissioned by the Financial Planning Coalition, a group advocating for increased regulation of their own profession, 83% of investors – across all demographics and political groups – favor increased regulation and oversight for financial planners.
Congress should pass – under the leadership of Sen. Bennet – pro-consumer common-sense financial planning regulation to restore transparency and accountability to the financial planning profession. It will allow hard working Americans to feel confident and secure when seeking crucial advice on how to handle their finances. And it will ensure that consumers like Mike Rosen are able to place their trust in financial planners.
Nancy Johnson Jones is a Certified Financial Planner professional specializing in compliance for financial planners based in Denver and a national board member for the Certified Financial Planner Board of Standards. EDITOR’S NOTE: This is an online-only column and has not been edited.
