ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, November 3, 1996 TAG: 9611040101
SECTION: BUSINESS PAGE: 1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ROB WELLS ASSOCIATED PRESS
To join the fast-growing investment adviser business, all you need now are three basic qualifications: a checkbook, the ability to spell your name - and a pulse.
State securities regulators are renewing a push for a minimum competency examination for investment advisers to ensure consumers at least are given accurate information about mutual funds, estate planning, retirement savings and a myriad of other issues.
Experts estimate that one-third of the nation's 150,000 investment advisers have been tested for their financial know-how.
``Basically, if you have your $150, you don't have huge disciplinary problems and if you take a cold mirror and put it under your nose and it fogs up, you're qualified,'' said Mark Griffin, president of the North American Securities Administrators Association, or NASAA, a coalition of state securities regulators.
Neal Sullivan, NASAA's executive director, put it bluntly: ``This is the poorest-regulated element of the entire industry.''
(In Virginia financial and investment advisers must register with the State Corporation Commission's securities division and pass a test demonstrating they understand the investment options they offer and state law affecting them.
Virginia law defines an investment adviser as someone who accepts a fee for providing advice or earns a commission from the sale of investments.)
The investment advisory business is booming: since 1980, assets managed by registered investment advisers have soared from $205 billion to almost $8 trillion, according to the Securities and Exchange Commission. The term investment advisers covers a lot of territory, from people running mutual funds to one-person businesses offering individuals advice on retirement planning.
This rapid growth and spotty regulation of the industry led Congress this year to pass legislation aimed at clarifying state and federal regulation of investment advisers. The new law created a new toll-free hotline to check an adviser's background.
Griffin, elected earlier this fall as NASAA's president, said the group has a special task force investigating a standardized competency examination for investment advisers and financial planners.
The task force has the unenviable job of sifting through at least 19 professional designations - ranging from Certified Financial Planner to Registered Employee Benefits Consultant - and figuring which ones, if any, should be recognized by states. For investment advisers who haven't obtained any professional training, the task force will try to craft a financial literacy test.
``While it's true that there are several industry organizations that issue marks and designations and you have to take a test to pass them, it is not required,'' said Griffin, who also is Utah's securities division director.
``The problem is this, what does the consumer know about these designations?'' He says the public also is confused about distinguishing among the various categories of advisers.
A person operating a business that gives advice on stocks, mutual funds or other securities for compensation is supposed to write a $150 check to register as an investment adviser with the Securities and Exchange Commission. Otherwise, no education, exam or work experience is required.
States regulators register the individual investment advisers and, under the new law passed by Congress, small advisory firms with less than $25 million in assets. Many states test individuals on the relevant laws but don't test their competency; some states require additional testing.
By contrast, the nation's 510,000 stockbrokers must register with the National Association of Securities Dealers Inc., or NASD, and pass a test; these people are called ``registered representatives.'' There's some overlap among stockbrokers and investment advisers.
Barry Barbash, the SEC's director of investment management, said Congress never gave the SEC authority to create a national competency test for investment advisers - even though the SEC sought such powers in the 1970s.
``It's very difficult to set standards in the investment advisory area because of the difference in the types of services,'' Barbash said. The industry is debating ``whether there is a one-hat-fits-all for testing,'' he added.
A number of trade groups provide competency testing, but some focus on only specific areas, such as tax planning and accounting issues. The leader is the Certified Financial Planner, or CFP, a title advisors earn if they have three-years experience and pass a two-day examination. The group supports a standardized competency examination.
``How much longer should it be possible for incompetent persons to be licensed or registered by the state securities agencies to practice as financial planners or investment advisers with the public?'' Robert P. Goss, executive director of the Certified Financial Planner Board of Standards said at a hearing last year.
Barbara Roper, investor protection director for Consumer Federation of America, said someone with a CFP designation shows they have ``taken the time to educate themselves further. But we can't make a statement about the quality of the education,'' Roper said.
Resources to check financial planners:
* The Certified Financial Planner Board of Standards, Denver. Toll-free number to confirm an advisor is licensed to use the CFP designation, disciplinary history or to lodge a complaint. 888-CFP-MARK (888-237-6275).
* North American Securities Administrators Association, Washington, D.C. Will provide phone numbers of your state securities commissioner who monitor records of state-licensed financial planners. 202-737-0900.
* National Association of Securities Dealers Inc., Washington, D.C. Toll-free number to check disciplinary history of stockbrokers who also perform investment advisory services. 800-289-9999.
* National Association of Insurance Commissioners, Kansas City, Mo. Will provide phone numbers of state insurance commissioners who can check to see if investment advisors are licensed to sell insurance. 816-842-3600.
* National Fraud Exchange, Reston, Va. National search on state, federal and professional disciplinary histories of financial services companies and professionals. Cost: $39 for first search, $20 for additional searches. 800-822-0416.
* National Association of Personal Financial Advisers, Buffalo Grove, Ill. Information on fee-only planners, financial advisors who receive no commissions or other benefits from sale of financial products. 888-FEE-ONLY (888-333-6659).
LENGTH: Long : 117 linesby CNB