Is Your Money Safe?

Many of those charged with watching other people's money saw their prestige crumble after the economic crisis of 2007-2009.

From bankers to insurance brokers to mutual fund and wealth managers, public confidence in their investing know-how nearly collapsed—leaving consumers wondering if their money was safe and secure enough to be there when they wanted it.

Some of those investing stewards are still trying to recover, including one of the more visible professions—financial planners—who, analysts say, are trying to win back the trust of investors, while fighting an already sketchy reputation.

"There's no question there's been a crisis of confidence for us since 2008," says Paul Auslander, president of the Financial Planning Association, a membership organization for financial planning experts in the United States. (More:Special Report on the first anniversary of the financial crisis.)

"With 401(k)s falling, plus the Bernie Madoff and Allen Stanford scandals, clients are worried. But there's a feeling now that if we don't have consumer confidence, we have nothing," Auslander says. "We're doing a lot of watching ourselves to ensure we have a good reputation." (More: Bernie Madoffand Allen Stanford)

However, some analysts say even before the Great Recession, many financial planners and advisers—and those associated with them—were anything but reputable.

"They took a hit from the recession and I wouldn't indict an entire industry, but they don't deserve a good reputation now or before," says Jill Gross, a professor of law at Pace University and a director of the Investor Rights Clinic.

"I don't believe many financial planners provide the level of services to customers that they (customers) thought or think they should get," Gross argues. "There's a lot of dubious practices and far too much misunderstanding of what they do."

Trying to figure out what a financial planner does may be like trying to understand a stock derivative—leaving heads spinning over the many levels of service, pay and products.

For starters, almost anyone can call themselves a financial adviser and offer investment advice. There's no training or government registration required if someone simply puts out a shingle or creates a website with the words "Financial Planner" on it.

But there is a higher level of financial planners, whose licenses and/or registration with a U.S. government agency are required when it comes to dispensing investment advice.

Those include a chartered financial analyst (CFA), certified financial planner (CFP), chartered life underwriter (CLU), and a masters of science in financial services (MSFS) among others. And some certified public accountants (CPA) double as investment advisers. If a firm is big, and holds a large amount of assets, usually $30 million or more, it must register with theSecurities and Exchange Commission (SEC).

As for compensation, this too can leave heads scratching.

There's a fee-only basis structure—getting paid for the work but not receiving compensation for selling any products to a client. Then there's commission-only, in which advisers skip fees but receive a commission for selling financial services products, such as real estate and insurance items.

There's also a combination of fees and commission. And then there's salary plus bonuses, in which discount brokerage firms and banks compensate their employees with a base salary plus incentive pay.

Products offered can be as simple as tax advice or a method for a client to invest money, such as a mutual fund. Or the product can turn complex — perhaps complicated annuities and sophisticated securities.

No Specifics on Regulation

When it comes to regulation, there are no specifics at the federal or state level, but various rules apply to most of the services they provide. Under U.S. law, planners and advisers are supposed to give their clients an ongoing fiduciary duty—or to provide full and complete disclosure of fees and conflicts of interests.

But not all do, and that has some in the industry worried, says David Hefty, CFP, CEO and co-founder of Hefty Wealth Partners,an investment advisory firm.

"There's the good and the dark side of our industry for sure," adds Hefty, who manages some $170 million in assets from his Auburn, Indiana, headquarters. "I think we could use more regulation on the brokerage side. Those planners who do their fiduciary duties are the ones getting customers back after the economic crisis."

For one former financial planner, the commission-based fee model creates conflicts of interest.

"I had battles with management that I would not sell certain products that I was told I had to," says Michael Hayes, who worked at a large bank brokerage firm for 14 years before leaving to start his own specialized staffing firm, Momentum. "Because I was not going to bend, it caused me and my partner considerable stress. But we kept our promise to clients to do right by them."

It's not just compensation but a lack of expertise that causes problems in the industry, says Catherine Valega, a Certified Financial Planner with Green Bridge Wealth Management LLC.

"Too many people go to plain financial advisers, who may lead them to products that don't suit their portfolio," Valega explains. "Then if the portfolio turns down for whatever reason, the clients feel burned and are even less likely to consult someone when they really need it."

It's not just the planners who are responsible for the bad rap, says Hayes. "Clients often have unrealistic expectations when it comes to making money like what happened during the tech bubble," Hayes adds. "Many clients are too easily convinced to chase high yields or returns."

While acknowledging there are problems, many in the field are quick to stress the good they do. (More: 8 Ways to Avoid Financial Abuse)

"Financial planners are there to help with cash flow and financial security," says Michael Insel, a partner and chairman of the private clients practice at Kelley Drye & Warren LLP. "A good planner is going to help someone understand what they need."

"It makes more sense than ever to have a financial planner now," says Samantha Fraelich, a CFP and vice president of Bernard R. Wolfe & Associates. "So many people's portfolios suffered huge losses during 2008. If you aren't using a financial planner, you're probably missing out on more sophisticated investments and opportunities."

There are some 207,000 financial planners in the U.S., according to the latest statistics from the Labor Bureau, but there should be plenty more ahead. Their numbers are expected to increase by 32 percent over the next eight years, one of the highest job growth rates tracked. Median pay is listed at $64,000 but commissions and fees put many in the six figure or more category, while managing billions of investment dollars.

In the end, say analysts, when it comes to picking the right financial planner, consumers need to ask questions on pay and shouldn't be afraid to admit their lack of financial knowledge. And if a planner doesn't specify what he or she does and disclose conflicts of interests, move on.

"Most planners are trying to do the right thing," says Paul Auslander. "We're seeing more and more people calling for advice. I think something good has come out of the crisis of confidence. We as professionals are watching ourselves. There may not be a better time for our industry."