When you visit a pediatrician, you know she graduated from medical school and completed additional specialized training. When you do business with a lawyer, you know he has a law degree. When you send your child to school, you are certain the teacher is state-certified and meets state-mandated continuing education requirements.
So is the same thing true when someone hands you a business card that says financial advisor or financial planner? Does the title guarantee a certain level of education or ethics? Or can anyone hang a sign outside a storefront and hawk financial planning services, even without much – or any – formal training?
The answer, for worried consumers, is this: “Just about anybody can call themselves a financial planner or financial advisor,” says Kevin Keller, CEO of the CFP Board, which sets and enforces the standards for certified financial planners. “It really is a ‘buyer beware’ situation when a person is looking for an advisor.”
People who call themselves financial advisors can work in a number of industries. Some may sell insurance products. Others may provide holistic financial advice for a fee. Another may work for your investment broker. The titles of financial advisor or financial planner “are not particularly descriptive, and they have been co-opted largely by the marketing departments of organizations,” Keller says.
Want to know how to find the right financial advisor or planner for your needs? Here’s what to know about who can call themselves a financial advisor or financial planner – and how to select a good financial advisor.
Look for certain credentials. There are more than 180 professional designations listed on the Financial Industry Regulatory Authority, or FINRA, website. But, Keller notes, not all credentials are created equally. Some aren’t particularly demanding and can be achieved with a weekend exam or other low-level requirements, he says. “There’s no rigor,” Keller says.
For most consumers, looking for an advisor who is a certified financial planner, or CFP, will help them locate a financial professional who has met certain educational, ethics and experience standards and has passed an exam. “Anyone can pretty much call themselves a financial advisor, but [they don’t] have the same requirements as someone who’s calling themself a certified financial planner,” says Frank Paré, a certified financial planner and national president of the Financial Planning Association.
Other credentials, such as certified public accountant, or CPA, and chartered financial analyst, or CFA, designate certain useful specializations. But experts recommend trying to find someone who uses them in conjunction with CFP. “You can call yourself a financial advisor and have these designations but not have a fiduciary obligation that CFP would confer,” Paré says.
Ask the right questions when interviewing potential advisors. To understand whether someone you’re considering hiring as a financial planner is committed to prioritizing your well-being, ask whether they adhere to a fiduciary standard.
Fiduciary duty is an obligation to working in the best interest of a client and putting his or her interests first when selecting planning strategies and suggesting products such as stocks and mutual funds. A suitability standard, on the other hand, requires that the financial professional suggest products that are suitable for you, but may not be the very best fit.
“One of the questions you have to ask is, “Will you act as a fiduciary for me at all times and will you put it in writing?'” Keller says. Getting a “yes” answer to that question helps you avoid a person who will act as a fiduciary, but then change hats and sell you products that only meet a suitability requirement.
Paré suggests saying, “Talk to me about what your conflicts of interest are and what that means in terms of what I’m paying?” You want to know that the person is giving you the best advice for you, not because they will earn commission on the sale of a certain product.
In addition, like with any business relationship, you’ll want to know how a potential financial advisor will charge you, his approach to financial planning, experience level and any other characteristics that would make him a good – or bad – fit. But most importantly, know that anybody can call themselves a financial advisor or planner, so be cautious, look for professional designations, such as CFP, and ask good questions.
