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Posts from the ‘Professional & Business’ Category

20
Sep

Fees of a Fee-Only adviser are only paid by the client.

I have not understood why there has been any resistance to requiring financial planners and investment managers to be held to a fiduciary standard.  A recent article in the Wall Street Journal (WSJ) may indicate why some do not want to be held to a fiduciary standard.

The Free Dictionary by FARLEX defines a Fiduciary as: “An individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.”

A fiduciary relationship encompasses the idea of faith and confidence and is generally established only when the confidence given by one person is actually accepted by the other person.”

Many of us believe it is putting the client first. 

Jason Zweig’s September 20th article “ ‘Fee-Only’  Financial Advisers Who Don’t Charge Fees Alone” may show why there is resistance to a fiduciary standard for financial planners and investment managers.  They found that 24% of the 33,949 certified financial planners (CFP) they analyzed described their compensation as “fee-only”. 

The article notes that “Securities lawyers and government regulators say that an adviser who works for a brokerage firm or insurance company that charges commissions shouldn’t describe his services as ‘fee only’, even if the adviser himself doesn’t charge commissions to his clients.” Although none of the CFPs at major banks and brokerage firms, the WSJ identified 661 listed CFPs who call themselves ‘fee-only’” at some of the major banks and brokerage firms.  The problem extends beyond CFPs. 

Can you argue that if the compensation is not accurate, the advisor is not a fiduciary?

The WSJ Article

20
Jan

“Most advisers overstate their expertise”

Jeff Benjamin of “Investment News” discussed a recent survey by Scott Smith
of Cerulli Associates Inc.  Following is a portion of the article:

‘ “We found that 59% of respondents were calling themselves full-scale financial planners, when it fact many of them were actually investment planners,” he said.

In Cerulli’s parlance, which divides the overall financial intermediary universe into four broad categories, there are subtle yet distinct differences between an investment planner and a more comprehensive financial planner.

Even though 59% of respondents identified themselves as financial planners, Cerulli calculated that only 30% actually fit the definition of being better qualified and certified, working with clients to build comprehensive plans that include insurance and estate planning.

Investment planners, by comparison, focus on asset management, retirement and college savings plans but tend to offer more-modular-style plans.

According to Mr. Smith, only 22% of the 1,500 respondents identified themselves as investment planners. But when he went over the details of each respondent’s business, Mr. Smith realized that 56% of respondents are actually investment planners.

Mr. Smith said much of the discrepancy could be attributed to that fact a lot of advisers view themselves as being more comprehensive than they actually are, simply because they believe they have the potential to be more comprehensive.

“Firms have encouraged their advisers to expand their advice relationships with clients; however, advisers tend to overstate the degree to which they are involved in the planning process,” he said. “The movement to extend advice services is likely being accelerated by turbulent markets, as advisers who base their value to investors on investment performance have suffered more than those with broad advice relationships.”

In the two remaining categories — money manager and wealth manager — Cerulli found that advisers have a more realistic perspective on the services they are providing.

Money managers, defined as mostly managing and building portfolios, were identified by Cerulli as representing 9% of the total universe, which was in line what survey respondents indicated.’

The above illustrates why consumers need to understand the different type of financial and investment services that are available.  Then they need to identify which type of service they need.  There are resources on line that can help identify the background and experience of the person they think may be appropriate.  Several people should be interviewed before retaining their services.  

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19
Jan

AICPA 2012 Advanced Personal Financial Planning Conference

The last three days I attended the 2012 Advanced Personal Financial Planning Conference of the American Institute of Certified Public Accountants.  The conference is an annual conference for CPA personal financial planners.  The comprehensive program had an exceptional lineup of nationally recognized experts.  It was an energizing experience.  I learned new tools and techniques that can help my clients achieve their financial goals.  It included the opportunity to bet current information on changes by lawmakers and rule makers that could affect clients’ finances.  Discussing this information with an elite group of financial planners from around the country was also an opportunity to share best practices.  I was able to take away many ideas that will increase my value to my clients. 

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