“Whenever you purpose to consult with anyone about your affairs, first observe how he has managed his own; for he who has shown poor judgment in conducting his own business will never give wise counsel about business of others.” — Socrates (Letter to Demonicus)
The smartest and most successful folks are the ones who know what they don’t know. For those of you who are open-minded and want to stay up-to-date on your financial situation, this chapter may be a guide to your guide. Financial advisers are no longer purely for rich people. Believe me, there’s enough of us to go around. So who do you pick? That’s a great question.
I’ve encountered numerous clients ready and willing to implement certain investment products, who in the past were unable to do so because their former advisers lacked the necessary securities licenses. Such clients were then restricted to the product competency of that adviser. Talk about trying to fit a round peg into a square hole.
My agency for example, has ten financial advisers to my knowledge. However, throughout the years we have had hundreds of “financial advisers” pass through. According to FINRA, in 2005, there were a baffling 48 different designations a financial adviser could obtain. Throw in some new regulations and a financial meltdown, and that number soared to 95 professional designations in 2010!
Ever hear of a CFA? How about a CRFA? They sound the same don’t they? The former, Chartered Financial Analyst, requires 900 hours of study in various areas of accounting/finances and completion of three six-hour exams (with just a 45 percent pass rate). The latter, Certified Retirement Financial Adviser, is a paltry 100-question multiple choice exam.
How about a RSA, FSCP, ChFC, CLU, ABC123 perhaps? Our industry has become flooded with more licenses and designations than professionals can track, let alone the average customer. In conversations of taxes, there is usually one single resource, your trusted CPA (Certified Public Accountant). So why, when it comes time for the client to actually move their money and life savings, is there a constellation of alphabet soup?
Wait, we’re not done yet. There exists another assembly of advisers who attempt to skirt compliance by creating their own designations. You may have received a call recently to have your retirement portfolio reviewed by a “financial architect,” “monetary engineer” or “economic designer.” You might be laughing right now, and you should be. These labels are more often used by insurance salesmen as they fly under the radar of the securities industry. The Wall Street Journal has identified over another 115 designations that FINRA does not track. As you may be realizing, the less education and licensing you have, the more you are able to speak freely and tout nonexistent knowledge.
Did you know there are even part-time financial advisers? These agents are made famous by various multilevel marketing programs. The first question to them is often, “Financial adviser — that’s great, are you full-time or part-time?” The vast majority regrettably are part-time. The process often goes like this: Call your friends and family, inquire to their life insurance situation, sell them term life insurance, ask for referrals and then immediately offer the new client a position to be a financial adviser with your company. The spread of financial education is important, but misinformation can be as harmful as no information. The bulk of these experts I’ve come across are stay-at-home moms, personal trainers looking for a side gig or people involved in a whole array of pyramid schemes, bouncing from a Tupperware meeting to a financial planning consultation.
I am extremely proud to say that the industry is making some attempts to untangle the mayhem. The media has played a large role in popularizing the CFP (Certified Financial Planner). Many equate the CFP to the CPA. In order to use these letters after your name, one must have at least three years of experience in the field, a sponsor/mentor, a clean record and then pass six college-style courses with final exams, present to an expert panel for approval and then sit for the daunting 10-hour board exam with a less than 60 percent pass rate. Only then can a financial planner truly be certified. Please visit www.cfp.net for additional information. On the investment side, clients should become familiar with FINRA’s website “Broker Check.” This will tell you the good, the bad, the ugly on your financial adviser.
The most common horror stories involve grandma and grandpa. This is an area of financial planning that can spell calamity, frequently an age bracket with the most money, but mental faculties beginning to fade. Investment News wrote an article in 2013 ("Seniors Baffled by Raft of Specialty Designations") that went on to address over 50 designations catered specifically to seniors! At a stage of life where simplicity and transparency are vital, can we confuse these poor old-timers any more?
Here are some tips to bear in mind during your search for a CFP:
A trustworthy adviser’s introduction should start with: A) Who am I? B) Who do I work for? C) How do I get paid? D) How do we get started? This is a designed sequential order. If there is disagreement at a certain step, the following are a moot point.
In summary: 1) Interview your “guy.” 2) Ask who they are beyond a spreadsheet. 3) If they are young, qualify their experience; but if they are old, inquire about their practice transition. 4) Keep an open mind. 5) Demand he or she speak English (or whatever makes sense to you). 6) Ask to see their financial plan. 7) Find passion in your adviser. Ask “Who are you and why are you?”
It’s OK to seek help. Think about your money in the same fashion you would any other aspect of your life you deem important. How do you choose a doctor? How do you pick what day care to send your baby to? How do you hire, fire and promote within your own organization? Don’t make it more complicated than it needs to be. Finally, don’t skimp on researching your future fiduciary, remember the saying “Quis custodiet ipsos custodies?” — from Juvenal, Latin for “Who will guard the guards?”
 Financial Industry Regulatory Authority, 2010
 “Is Your Advisor Pumping Up His Credentials,” Wall Street Journal, 2010
 “Seniors Baffled by Raft of Specialty Designations,” U.S. News, 2013
Bryan M. Kuderna is a Certified Financial Planner, Life Underwriter Training Council fellow and Investment Adviser Representative with Kuderna Financial Team. He is a perennial qualifier for the industry’s prestigious Million Dollar Round Table. He is the author of the best-selling book, “Millennial Millionaire: A Guide to Become a Millionaire by 30.”