Those who plan for their financial future are more confident about their ability to take care of themselves, states the 2012 Household Financial Planning Survey, prepared, in part, by the Consumer Federation of America. Here, CFA's executive director, Stephen Brobeck, talks to contributor Michelle Lodge about the survey and regulatory reform.

1. What can advisors do to improve the financial literacy of their clients, and how will that benefit their practices?
Advisors should clearly explain the relation between investor risk and reward. They should also clearly spell out the nature and extent of the risks of investment options contemplated. When investors have a better understanding of finances, they may be less likely to blame their advisor when they experience risks rather than rewards. However, given the dependence of investors on their advisors, the most important thing advisors can do is act in their clients' best interests.

2. What were the most compelling findings of the recent survey?
The most significant one is that across all income classes, those who developed comprehensive financial plans were more confident about their future and saved more effectively. Also, by a margin of 48% to 22%, those respondents who plan financially are more likely to describe themselves as living comfortably. This planning appears to be more a result of feeling satisfied about finances than of income. For example, those in the $50,000 to $99,999 income bracket who had a financial plan, registered as much comfort with their financial situation as "non-planners" in the $100,000 and above bracket. Also of note, only 31% of respondents said they had a comprehensive financial plan, while about two-thirds (65%) indicated they adhere to a plan for at least one of their savings goals. For those in the two highest income brackets, "planners" report saving a higher percentage of income and having built greater wealth than "non-planners." Planners with incomes of $50,000 to $99,999 were more likely to report they save 10% or more of their income (57% versus 39%) and to have accumulated at least $100,000 in investments (37% versus 19%).

3. How will the Dodd-Frank law affect advisors?
It will depend not only on the specific rules adopted by the Securities and Exchange Commission, but also on the degree to which advisors put the best interests of their customers first. Those who sell high-cost products with poor track records could be adversely affected, while those who seek to recommend products that put their customers' interests first could well feel and do better because they no longer have to compete with advisors who make promises they cannot deliver.

4. What's good about Dodd-Frank?
For the most part, the law has yet to be implemented. But when it is, its reforms will act to stabilize a financial services system that nearly drove the U.S. economy into a depression.

5. However, is Dodd-Frank toothless?
If the law is implemented effectively, it could help prevent the kind of losses that J.P. Morgan Chase recently suffered as well as averting losses that occur from damaging the financial system. Derivatives reporting requirements should provide greater transparency into the kinds of trades J.P.Morgan was engaged in. The Volcker Ruler and lesser-known Lincoln Rule should help move risky, speculative practices out of insured financial institutions. Cross-border application of derivatives rules should help ensure that multinational financial institutions are not able to evade the rules, putting the U.S. market at risk, by conducting transactions through foreign affiliates or branches.

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