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 →

Investor Personalities: Which one are you?

Posted on August 27, 2012 by Frank Armstrong

For some, money is an emotional subject which they treat far differently than other important elements in their lives. For a variety of reasons, they are just not about to seek out a professional to help them meet their goals. I have never taken a psychology course, so I admit I am way out of my depth here. But I have watched investors for a long time, discussing their sometimes curious behavior with my peers, which has allowed me to make some non-scientific and intuitive observations on investor behavior.

The Control Freak

A few individuals realize how important their investments are to their future but simply can’t give up control of their finances. Either they have trouble delegating things in general, or money is such a personal, powerful, and emotional part of their existence that they reserve that activity for themselves alone. Continue reading →

Don’t Select Financial Advisors Who Misrepresent Credentials!

Posted on July 6, 2012 by Jack Waymire

The media calls them “alphabet soup”. Investor Watchdog’s record is reviewing the credentials of an advisor who had 28 letters after his name. The soup I am referring to is the letters that represent certifications, designations, and accreditations that appear after advisors’ names.

We are all familiar with the well-known CPA® (Certified Public Accountant™) designation. Less well known is CFP® (Certified Financial Planner™) designation. And, even lesser known is CFA® (Chartered Financial Analyst™), a very highly regarded designation that can take three years to obtain. Continue reading →

Are Your Financial Advisors’ Credentials Fake?

Posted on June 21, 2012 by Jack Waymire

The media refers to all of the initials after an advisor’s name as “alphabet soup”. Sometimes the initials are referred to as designations. Other times they are called certifications. I am going to use certification when I refer to them. Financial advisors acquire certifications when they accumulate specialized knowledge that increases their competence. Most advisors use the initials to prove they are experts in their fields. For example, a CPA knows more than an accountant who is not a CPA.

However, what if an advisor purchased several certifications so he appears more knowledgeable than he really is? This is a major problem because the advisor is using a deceptive sales practice to get you to select him. Let’s call the tactic what it is – misrepresentation that violates industry regulations. Do you want this type of person controlling or influencing the investment of your assets? Absolutely not! Continue reading →

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.

“Real” Financial Advisor or Sales Representative?

Posted on October 26, 2011 by Jack Waymire

Several investors have asked me for easy ways to determine if the professionals advising them on their investments are “real” financial advisors or sales representatives masquerading as advisors.

These investors have a valid concern. Sales representatives frequently market themselves as advisors because they know investors do not want salesmen investing their assets. If they told the truth about their actual role (selling investment products) they could lose the sale.

Following are three easy ways to recognize the type of person advising you on your investments.

First, “real” advisors are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs). If your advisor is not an RIA or IAR you are following the advice of a sales rep.

Second, “real” advisors are willing to acknowledge they are financial fiduciaries. This is the highest ethical standard in the financial service industry. If your advisor is not willing to provide this acknowledgement in writing you are following the advice of a sales rep.

Third, “real” advisors are compensated with fees for their knowledge, time, and services. If your advisor’s only method of compensation is commission, you are following the advice of a sales rep.

Financial Advisors Abuse Designations

Posted on October 20, 2011 by Jack Waymire

Some audits by State Securities Commissioners have found advisors who use RIA (Registered Investment Advisor) after their name. This deceptive sales practice confuses investors who believe RIA is a designation like CPA(r) or CFP(r).

This is the tip of the proverbial iceberg. Thousands of advisors have strings of initials after their names. The initials denote specialized expertise that increases the competence and quality of advisors. What many investors don’t know is less ethical advisors purchase the initials to impress them.

High quality designations have prerequisites, substantial study time, examinations, and continuing education requirements. Low quality designations have none of the above. In fact, they are purchased by less ethical advisors to trick investors into giving them control of their assets – “you can trust me, I am an expert. Look at all of my designations”.

Unfortunately most investors do not know good designations from bad ones.

The best designations are CFA(r), CFP(r), CIMA(r), and CPA/PFS(r).

Watch Out for the Charlatans of the Investment Industry

Posted on May 14, 2009 by Matthew Arndt CFA CPA CFP

Having suffered devastating losses, witnessed the Bernie Madoff scandal, and been forced to revise retirement plans for the worse, the greatest question for weary investors today is: Whom can you trust? Consider one of the most trusted groups of professionals, doctors; they must go through rigorous schooling and training and take the Hippocratic Oath in order to practice medicine. There are no parallel standards or code of ethics for financial advisers.

One of the most serious concerns for investors is the large number of ordinary people holding themselves out as financial advisers without having met any rigorous competency standards or embraced a code of ethics; in other words, providing no proof that they are qualified practitioners devoted to a standard of professional conduct. High quality investment advisers hold certifications that prove they are experts in their profession.

Selecting an adviser lacking legitimate credentials based on salesmanship or personality alone can be a major financial risk. This is tantamount to letting a used-car salesman perform your open-heart surgery because you like his personality. It is incumbent upon the consumer to ensure the person handling their money is properly accredited and has the necessary experience to deliver and perform high-quality services.

Remember, not all investment certifications are close to being equal. Beware of phony certifications that claim to represent specialized knowledge. Questionable certifications can be attained through the redemption of a few cereal box-tops and a small fee. Brokers who buy these fictitious designations are ethically challenged and disreputable. The CFA, CPA, and CFP are highly respected credentials for investment professionals held in high esteem. Perhaps the most rigorous to attain is the CFA designation. The CFA is respected by regulators and demanded by private investors.

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