Why is a Bogus Financial Planner so Difficult to Identify?

Posted on February 22, 2013 by Jack Waymire

You need to know there are real financial planners and there are bogus financial planners. The fake planners use the title to reduce sales resistance when they sell investment and insurance products. For example, a plan may recommend a substantial purchase of insurance products. You are more likely to buy if it is recommended by the plan and not by the financial planner. What is the difference? There is no difference when the plan represents the financial interests of the planner.

Industry Regulations

There are no industry regulations that limit who can call themselves financial planners. A brand new sales rep may adopt the title to facilitate the sales of financial products. There are no tests to make this claim more valid and there are no licenses for financial planners. If you are asking why, it is because Wall Street firms also benefit from this deceptive sales tactic. The firms make more money when they make it easy for their reps to sell investment products and services. And make no mistake. Wall Street has tremendous influence over the regulations that govern the industry. Continue reading →

What Are the Critical Differences between Financial Planners and Financial Advisors?

Posted on October 31, 2012 by Jack Waymire

Most investors are confused by the roles of financial planners and financial advisors. In fact, over 75% of investors say they do not know how they differ. They believe these are two roles that provide the same services. Not exactly!

One source of the confusion is anyone can call themselves financial planners whether it is true or not. There is no regulation that prevents this deceptive sales practice. Not too long ago, 70% of planners were actually insurance agents who called themselves financial planners for two reasons. First, the role of the planner was more acceptable to people than the role of agent so there was less sales resistance. Second, they used the financial plan to sell large amounts of insurance products (annuities, life insurance, long term care). Again resistance was lower because the clients’ financial plans recommended the products not the agent/planner. Continue reading →

Appealing College Financial Aid Packages

Posted on July 2, 2012 by Steven Stanganelli

Is it possible to get a college to reconsider their financial aid package?

Client Question: My son was accepted into his top choice and then a few of his lesser choices. The only problem is that School #1 presented us with a financial aid package that is about 1/3 less than what some of the other schools offered. Is there anything that we can do? Do schools ever reconsider their financial aid packages?

Boston Money Coach Answer:

Absolutely! You have the right to appeal and discuss the findings with the financial aid officer. Your case may be strengthened by mitigating circumstances in your income or asset situation (change in job status since the base year income used for calculating your Expected Family Contribution, for example). Also, consider gaining leverage with the financial aid officer by leveraging off of any aid packages offered by a competing institution where you applied. Continue reading →

Do Investors Need Financial Advisors?

Posted on May 14, 2012 by Investor Watchdog

My answer is “Yes” if the following five conditions are met:

All of their advice is based on the needs of investors
Advisor ethics always put investor interests first
Advisor competence enables them to deliver competitive rates of return
Advisors provide a disciplined investment process
Performance includes reasonable risk and expense

Unfortunately, less than 25% of advisors are capable of meeting all of these criteria. The other 75% are sales representatives who make their living selling investment products. Unfortunately, investors don’t know the critical differences between advisors and reps because they don’t have an effective process for selecting high quality advisors. See Do Financial Advisors Have Two Faces? for more on the topic of sales representatives vs. financial professionals providing services for fees. Continue reading →

More CPAs are Providing Financial Planning Services

Posted on February 22, 2012 by Jack Waymire

The AICPA announced more CPAs are beginning to offer financial planning services to their clients. This is an excellent fit due to the number of tax considerations in a financial plan.

CPAs have two major competitive advantages. First, their clients already trust them. And, trust gives them instant credibility. Second, CPA is a designation that is recognized by just about everybody. Very few people recognize the CFP® designation.

Some CPAs will look at planning as nothing more than an additional source of revenue from current client relationships. Notwithstanding its lack of recognition, other more serious CPAs will add a CFP® designation to their credentials. It’s excellent training and the designation will distinguish them from CPAs and CPA/PFS’.

Why Do Financial Advisors Want Investors to Like Them?

Posted on February 17, 2012 by Jack Waymire

The financial service industry figured out investors trust people they like. Once trust is established advisors can sell the products that make them and their firms the most money.

Does this mean all friendly advisors develop relationships with investors to take advantage of them? Of course not! A lot of competent, ethical advisors are very nice people.

However, consider this a warning. Not all nice friendly advisors are the competent, trustworthy professionals they purport to be. Just ask Bernie Madoff’s clients.

Investors would be way better off if they entered into business relationships versus personal relationships with their advisors.

What is Full Transparency for Financial Advisors?

Posted on February 15, 2012 by Jack Waymire

Financial advisors and financial planners practice full transparency when they provide investors with accurate information that describes their credentials, ethics, business practices, compensation, performance, and investment expenses. More importantly, they don’t withhold information that may cause investors to reject their sales recommendations or terminate their services.

A very low percentage of advisors practice full transparency. They can’t afford to. Full transparency could cost them money. Instead, they provide information that makes them sound like trustworthy financial experts and they withhold any information that may damage the perception they are trying to create.

Wouldn’t you want to know the experience, credentials, ethics, and business practices of the financial professional managing your money? Seems like a no brainer.

Financial Advisor Titles are Confusing

Posted on November 3, 2011 by Jack Waymire

One of the most frequent requests we receive from investors is asking us to describe the key differences between titles that are used by financial advisors and representatives.

As background, these titles are confusing because the financial service industry wants them to be confusing. Lower quality advisors are more productive when they blur distinctions between themselves and higher quality advisors. If lower quality advisors told the truth you would not buy from them.

Financial Planners – CFPs are best. They provide financial, retirement, college, and estate planning services. Be aware anyone can call themselves a planner whether they have the specialized knowledge or not. A high percentage of insurance agents call themselves planners to lower sales resistance.

Financial Advisors – They provide a number of valuable services, for example asset allocation, manager selection, and performance reporting. They do not pick securities.

Money Managers – They make investment decisions when they make portfolio management decisions. Mutual funds, separate account managers, ETFs, and hedge funds are examples of money managers. They pick securities.

Sales Representatives – They sell investment and insurance products. They are paid commissions by third parties for sales results. Reps are most likely to misrepresent their actual role to reduce sales resistance. They get away with it because pitches are verbal and investors have not learned to require documentation. Investors should trust what they see, not what they hear.

I hope this helps. Its tough when reps have superior sales skills.

How Not to Hire a Financial Advisor or Financial Planner

Posted on June 21, 2010 by DFree

If you’re considering hiring a financial advisor or financial planner, here are five things you should avoid during your selection process.

1. Never limit your hiring criteria solely on where the advisor is located in relation to where you live. You should always look for the most competent financial professional vs. the most convenient.

2. Don’t hire someone because they were referred to you by a friend or family member. Remember that it’s your money so you don’t know how your friend or family member determined that this professional was right for them. Conduct your own due diligence and make your own interview questions rather than counting on someone else’s hiring process. Word of mouth referrals can be very dangerous…think of Bernie Madoff’s victims.

3. Don’t limit your interview process to only one advisor. Yes, it will take some time, but remember that this is your financial future we’re talking about here. You should interview at least three financial professionals. Having a choice is very important so you can compare apples to apples. Use the same interview questions for each advisor.

4. Don’t hire an advisor solely based on his/her pitch to you. Be sure you obtain written documentation from each advisor regarding his/her backgrounds, experience, credentials, business practices, compensation, conflicts of interest, etc. Having this in writing is key. Also consider doing a background check on the person to ensure there are no hidden skeletons in the closet (prior convictions, bankruptcy, liens, compliance issues). Know who you are hiring!

5. Don’t hire a financial advisor or financial planner because they are nice and personable. There’s nothing wrong with liking your advisor, however, you should never hire just because you like them. Being nice doesn’t always equate to competence. Many highly competent financial professionals are very quantitative and detail oriented. I’d much rather have this skill set managing my financial future, personally!

Is Your Financial Planner Real?

Posted on July 18, 2009 by Jack Waymire

Did you know anyone can call themselves a financial planner? That’s right anyone regardless of knowledge, experience, or licensing. It is a popular title in the financial services industry because it doesn’t sound like a sales role. Consequently, the use of the planner title has become another deceptive sales tactic.

Years ago, insurance agents found their label had a negative impact on their ability to sell products. In fact, most people avoided them because they were agents. They associated the title with high pressure sales tactics. Consequently, agents needed a new title that was more acceptable to consumers.

You guessed it, they selected the planner title. In the past, 70% of planners were insurance agents. Instead of calling you to sell products, they called to help you develop a plan – a roadmap for your financial future. It sounded benign so millions of consumers responded positively to the new role.

Now comes the devious part. The plans were loaded with recommendations for annuities and life insurance. Plus, the plans were pretty much worthless. Sales reps masquerading as planners used cheap software that spewed out plans in a few seconds. Then the plans were provided "free" to consumers as long as they bought the plans’ product recommendations from the planners.

Do these fake planners still exist? You bet, there are thousands of sales reps who call themselves planners to reduce sales resistance.

How can you protect your financial future from this deceptive sales tactic? First, only select professionals who can document years of planning experience. Better yet, select planners who are CFPs`® or CPA/PFS’. Another tip is to select planners who are members of the Financial Planning Association, the National Association of Personal Financial Advisors, or the American Institute of Certified Public Accountants.

Another risk is the quality of the plan that is presented to you. Is it really based on sophisticated analytics or is it designed to sell investment and insurance products. Watch out for plans that are loaded with products that produce large commissions for the planner.

The ideal way to pay planners is with a fixed or hourly fee just like you pay other professionals you depend on for specialized knowledge and services. Some professionals charge fees for plans and also earn commissions from the sale of products that are recommended by the plan. It is always a good idea to require professionals to provide full written disclosure for all of their compensation.

Category Archives: Financial Planners