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October, 2014

Unlocking the Puzzle: Flummoxed by Financial Title Hyperbole? You Are Not Alone

By H. William Wolfson, DC, FICC, MS and Paul H. Auslander, CFP®, GFS®

The litany of financial designations may seem overwhelming and never ending, but what does it all mean? Financial advisor, planner, advocate, pundit, guru and more seem to be in print, social media outlets, television and radio. How is an investor to know who to contact for guidance with the myriad of financial products offered and what may best suited for them?

Unfortunately, almost anyone can call themselves a financial planner, i.e., commissioned-based registered representatives working for a broker-dealer and insurance agents. According to the Financial Industry Regulatory Agency (FINRA), at any given time, an individual can wear different hats when dealing with an investor and the services provided. Shockingly, some who call themselves financial planners may use different financial titles but ultimately not have any financial credentials! The Consumer Financial Protection Bureau has published a booklet on designations to help separate what they all mean. Of real concern, is the possibility there may not be a regulatory agency monitoring their activities and this can put an individual in harm's way. According to the Financial Industry Regulatory Authority, "You'll want to make certain you fully understand which areas of your financial life a particular planner can—and cannot—help with before you hire that person."

Suitability vs. Fiduciary Standards

dollar sign - Copyright – Stock Photo / Register Mark According to Jason Zweig, "Someone who owes you a fiduciary duty must put your benefit ahead of his own; in practice, that should mean minimizing fees, eliminating all avoidable conflicts of interest and fully disclosing any other material conflicts." This is in direct contrast to a financial representative held only to the suitability requirement. "Although advisors and brokers often perform the same function, advisers are subject to a strict fiduciary standard to act in their clients' best interest while brokers are subject to a less rigorous standard of suitability to ensure that their recommendations are suitable for customers."

Financial Planners vs. Investment Advisors

Broker-dealers (B-D) buy and sell commissionable financial products through their registered representatives, who are the firm's sales force. The B-D and their registered representatives are only required to adhere to a lower suitability standard when dealing with an investor. Be aware of the generic financial or investment consultant, planner or advisor title used by these individuals, as many are not held to a fiduciary standard.

In addition, life insurance agents often tout their ability to be financial planners by the use of life insurance products, i.e., whole life insurance, annuities, etc. Working as a salesperson for an insurance company, these individuals after receiving some level of sales and insurance product training, meet with prospective individuals and offer insurance products for a perceived client need. Depending on the product sold, the commission paid to the agent can be quite lucrative and at times is the first year's premium. According to the website, "Many insurance brokers push whole life policies because they provide them with the juiciest of commissions. And of course, every family's situation is different. For example, there are a few interesting uses for whole life insurance that make it a good deal for wealthy individuals. But the vast majority of Americans would benefit more from term life policies."

When dealing with anyone who makes a commission when you purchase a financial product, you should ask them to tell you in writing how many products/companies they investigated before they recommend this one to you. Why it is better than the rest, and most importantly explain their compensation in all years both in percentage and dollar terms. Anyone who will not do this is most likely someone with whom you do not want to have as your "financial advisor."

Unfortunately, when dealing with a non-fiduciary financial planner, an individual may not receive an objective, comprehensive analysis of their overall needs. Piecemeal financial planning as might be performed by a broker, registered representative, life insurance agent and the like, may appear prudent at the time of client purchase, but yet may well fall short of the client's financial expectations and true needs.

By the nature of their state license, DCs, MDs, DMDs, DPMs, DOs, CPAs, JDs, etc., are all fiduciaries and bestowed with the responsibility to always work in the best interest of the individual. Not surprising, "A fiduciary duty is the strictest duty of care recognized by the US legal system." According to FINRA, an investment advisor is a "legal term that refers to an individual or company that is registered as such with either the Securities and Exchange Commission (SEC) or a state securities regulator." Investment advisors are held to a fiduciary standard with the mantra to do no harm and place the needs of the investor before their own. For example, a Certified Financial Planner™ (CFP®) professional is a fiduciary and held to a very high standard when providing financial planning, or material elements of financial planning, and once they enter into a financial planning engagement, there is no "hat switching." Compensation may be hourly, as necessary for an agreed to engagement or a percentage of assets under management. In addition, full transparency is required and expected when working with clients as well as disclosing any conflicts of interest.

Developing a Plan to Follow

As a healthcare professional, after a new patient visits your office and is warmly greeted, forms are filled out so you may begin to ascertain the purpose of the patient's visit and how you may help them reach their health goals. Similar to a patient filling out the requisite office forms to gather information, CFP® professionals use a similar method of gathering information from a client to assist in achieving the client's financial goals.

The information obtained is analyzed and allows for preparation of a financial plan and an Investment Policy Statement (IPS). The IPS becomes the directional map with which the fiduciary advisor and client follow as the asset portfolio is established and monitored. The fiduciary advisor does not at any time take possession of the client's assets. Always acting in a fiduciary manner, the fiduciary advisor adheres to the instructions of the client as agreed to in the IPS. This is an example of full transparency and fiduciary responsibility. The CFP® professional places the needs of the client before themselves at all times vs. selling a product which at face value may appear suitable for the client. If your advisor isn't a fiduciary, you might want to ask "Why?"

Pundits and Their Paint Brush

Individuals who preach the financial gospel may have an ulterior motive and you should question what they are selling and not fully disclosing to you! They can be seen on television, radio, cable or in print where opinions are never ending but the supposed results are often lacking, never materialize or worse with lousy predictions result in financial loss or ruin.

However, by performing some research (Google can conceivably find anything); you may discover these pundits or financial advocates lack real product or topic knowledge. Unfortunately, selling a product or idea requires the seller to be persuasive and the buyer accept the message as factual. In his book, Future Babble: Why Expert Predictions are Next to Worthless, Dan Gardner said, "The inaccuracy of expert predictions isn't limited to pessimists or optimists, liberals or conservatives. It's also not about a few deluded individuals. Over and over in the history of predictions, it's not one expert who tries and fails to predict the future. It's whole legions of experts."

A Smart Decision

In every profession, whether healthcare, financial planning, insurance, law, accounting, etc., there are those professionals who are knowledgeable and experienced in assisting individuals who seek professional objective advice and desire to work with a fiduciary. Unfortunately, because of the numerous titles which exist within an industry, individuals may not fully recognize the importance of finding and working with fiduciary professionals. Instead, some fall prey to unscrupulous sales people who are more interested in lining their own pockets at the expense and heartache of unsuspecting individuals. Don't become a victim, but instead ask for a quality referral from people you trust, do your own internet search, or visit trusted sights.

Prior to engaging in any financial or insurance transaction ensure you thoroughly understand the reasons for the purchase. It is your needs which always remain paramount and you should vet the process to your complete satisfaction. Understand the time line the product purchased is intended for and the anticipated benefit. Ask questions, remain informed and importantly make sure it passes the smell test.

Unfortunately, once a dubious offer but good faith acceptance (decision) is made, it can be difficult and expensive to get it corrected; that is assuming you are able too. Buyer beware!



H. William Wolfson, DC, FICC, MS, obtained his Masters of Science (MS) Personal Financial Planning from The College for Financial Planning and is a candidate for CFP® professional certification. Dr. Wolfson remains active and engaged in chiropractic by volunteering his time as NY Delegate to the American Chiropractic Association and serving on assorted committees. He is also a board member of the New York State Chiropractic Association. Dr. Wolfson participates on assorted committees with the Financial Planning Association LI chapter. Dr. Wolfson retired after twenty seven years of active practice and may be reached at .

Paul H. Auslander, CFP®, GFS® has nearly 30 years of financial planning experience and is the immediate past Chairman of the Board of the national Financial Planning Association (FPA). He currently serves as president of the FPA Florida. Mr. Auslander is Director of Financial Planning and an investment advisor representative with ProVise Management Group, LLC, in Clearwater, Fla. He is also an investment advisor representative and registered representative with NFP Securities, Inc., Contact him at .

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