The Alphabet Soup of Financial Advice: Part I as published in InsideNoVa.com
When I started in the financial services industry in the mid-80s, you really only had two places you could go for financial advice: a stockbroker or an insurance agent. Fast-forward to 2017, and you’ll find an alphabet soup of financial titles, credentials and compensations.
Job Titles: These days, there are financial advisors, financial planners, investment consultants, asset managers, wealth managers and more. Most titles do not have specific legal definitions. One day, the marketing department decides to call its employees “wealth managers.” So they change the title on the business card, but not necessarily the duties involved. As a result, some wealth managers may only help you choose investments, and little else. Others may advise you on every aspect of your financial life, including investing, insurance, estate planning, tax planning, retirement planning and more. Same story for the other titles.
Credentials: Your advisor may also have professional credentials, or designations: CERTIFIED FINANCIAL PLANNER™, Chartered Financial Analyst®, Chartered Life Underwriter®, etc., etc. Professional designations do provide a clue as to the quality of the service you should expect to receive. For example, the CFP® Board requires CERTIFIED FINANCIAL PLANNER™ practitioners to put your interests ahead of their own, and to adhere to a strict code of ethics. If they don’t, they can lose their designation.
Compensation: In all these titles and designations there is no clue as to how your advisor is compensated. You have to find that out on your own. If they are being paid extra for recommending particular investments to you, they have a conflict of interest between what may be best for you and best for them. If you are the only one paying them for the advice they offer, it’s more likely to be based on what they think is truly in your best interest. Over the next several articles, I will help you become a better financial service consumer by teaching you more of the language you’ll find in the alphabet soup of financial advice.