Is Your Planner a Real Expert?

Anyone in the financial services industry can claim to be a financial planner whether it’s true or not. That’s because there are no regulations that limit who can use this title. Therefore, selecting a competent, ethical financial planner may not be the safe, easy process you thought it was.

Why do sales representatives (reps) claim to be planners? They know consumers put significant value on planning services and the professionals who provide them. They also know consumers don’t want sales reps handling their assets. By making false claims, the reps appear to be more professional than they really are, which makes it easier to sell investment and insurance products.

The key question is how can you determine the quality of professionals who claim to be competent, ethical experts when you are not an expert yourself? We have an answer. Follow the seven rules that are described in this article.

• Rule #1. Require written documentation for all sales claims.
  • Verbal information is easy to misrepresent
  • You don’t have a written record for verbal information
  • Verbal information maximizes the impact of rep personalities and sales skills
  • Verbal information is easy to deny later
• Rule #2. You want documentation for competence that includes the following information:
  • Years of financial planning experience
  • College education and degrees
  • Types of certifications and designations, for example CFP^® and CPA/PFS
  • Number of continuing education hours per year
• Rule #3. You want documentation for ethics that includes the following information:
  • Are there any client complaints on their compliance record?
  • Are there any criminal complaints and convictions? (convicted criminals can obtain licenses)
  • CRD or IARD numbers so you can check their compliance records at www.finra.org, plus your state’s securities and insurance commissioners
  • Are they Registered Investments Advisors or Investment Advisor Representatives so they can provide financial advice for fees?
  • Do they acknowledge they are fiduciaries when they provide financial advice and services?
• Rule #4. You want to know who the professional works for. There are three frequent possibilities:
  • The planner is an employee of a company
  • The planner is self-employed
  • The planner is an independent contractor who is licensed by a broker/dealer or Registered Investment Advisor
• Rule #5. You want to see copies of membership certificates that document their participation in high quality financial planning associations that have continuing education requirements.
  • The two best associations are:
    • National Association of Personal Financial Advisors (NAPFA)
    • Financial Planning Association (FPA)
    • State and local financial planning chapters of these associations
• Rule #6. You want full disclosure for potential conflicts of interest. For example:
  • The planner is employed by an insurance company and only sells that company’s products
  • The planner’s only method of compensation is commissions. Therefore the planner has to sell you products to get paid.
  • The planner’s advice or recommendations contain potential conflicts of interest that negatively impact your assets’ performance, risk exposure, or expenses
• Rule #7. You want to know how planners are compensated and what you receive for your money.
  • The types and amounts of fees (fixed, hourly, and asset-based)
  • The types and amounts of commissions (investment, insurance)
  • Describe the services they provide for this amount of compensation

Produced by: Paladin Registries & Directories, Inc. (www.paladinregistry.com)