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.