The financial planning industry, in an effort to polish its image, plans to establish a self-regulatory organization under the oversight of the Securities and Exchange Commission.

The watchdog organization, funded by member contributions, would have disciplinary power over planners and would set educational and testing standards.

Whereas most products that financial planners sell -- stocks, insurance, real estate -- already are regulated, the planning process is not. Anyone can hang out a financial-planner shingle, and between 50,000 and 200,000 people have, according to industry estimates. The great surge in the number of financial planners has spawned charges against some of incompetence, conflict of interest and even fraud.

The International Association for Financial Planning (IAFP), the industry's largest trade organization, this week proposed a self-regulatory organization modeled after the National Association of Securities Dealers, which monitors the over-the-counter stock markets. Legislation would be required.

Hubert L. Harris Jr., executive director of the IAFP, called the proposal a "very important step forward" toward "full recognition that something must be done to assure the public."

However, Michael Unger, a Massachusetts state securities administrator who headed an industry task force on the problem, likened a self-regulatory organization to the fox guarding the hen house. He called for state regulation.