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Can Anyone Call Themselves a Financial Advisor? Thumbnail

Can Anyone Call Themselves a Financial Advisor?

Be warned as I am getting on my soapbox this week. It is more of a “head’s up” sort of article. The short version is – Anyone can call themselves a financial advisor. I will break this down a bit and provide some recommendations. This will be no more than a three-minute read.

 Some Background:

  • There is no entity that requires someone calling themselves a Financial Advisor (FA) to meet minimum requirements.
  • No education standards. No licensing. No continuing education. Nada.
  • The person who cuts your hair meets minimum requirements, but not Financial Advisors!
  • Most people who call themselves Financial Advisors have security licenses, but it is not a requirement.
  • Some national organizations are trying to create a minimum standard to use the FA title, but I feel they are living the life of Sisyphus. 

A Few Differences with Financial Advisors:

  • Many insurance agents call themselves Financial Advisors.
  • If all they sell are annuities and mutual funds offered by their insurance company, I would never consider them a Financial Advisor. They are insurance agents.
  • If your FA works at a bank or a wirehouse (Merrill Lynch, UBS, etc), they are financial advisors.
  • This means they have met licensing and continuing education standards.
  • I won’t get into how they are not required to put their client’s interests ahead of their own as that is a topic for another time.
  • People like me are CERTIFIED FINANCIAL PLANNER™ (The CFP Board requires it to be typed in all caps. Talk about crazy requirements).
  • CFPs meet minimum education requirements such as a Bachelor’s degree. Also, lots of testing, continuing education, years of experience, and always being a fiduciary where the client comes first.
  • There is a whole other level when it comes to fees. Again, story for another day. 

When To Hire a Financial Advisor:

  • If you are looking for investment-only advice, I would recommend you work with a financial advisor.
  • Again, this is where advisors are at places like Merrill Lynch and UBS come into play.
  • Their primary focus is on investments.
  • They do not focus on financial planning, tax planning, workplace retirement plans and benefits, insurance, estate planning or more. 

When To Look for a Financial Planner:

  • When I say Financial Planner, I mean a CFP®.
  • Things like PFS (Personal Financial Specialist) or CPWA (Certified Private Wealth Advisor) also fall under this category, in my opinion.
  • You hire a Financial Planner when you want help with things like tax reduction planning, estate planning, investment management, financial planning and more.
  • Think of a Financial Advisor as looking at one tree, while the Financial Planner is looking at the forest.
  • Also, if your Financial Planner is not a CFP, PFS, or CPWA, they are not a Financial Planner, in my opinion. 

Final Recommendations:

  • Always look at the credentials and requirements for your Advisor or Planner.
  • Also, check places like BrokerCheck to see if they are registered and/or have any complaints. (Note – not all advisors are registered here. For example, I am not anymore due to my structure.)
  • Verify how they are paid and what your total charges will be.
  • Definitely get in writing what services they will provide and if they will put your interests first (assuming that is important to you). 

Last Comments:

  • I met a person years ago who said the bus driver at his mother’s nursing home was a Financial Advisor.
  • Some time back I was at a training event and two “advisors” laughed when someone asked them about having to adhere to a proposed Fiduciary standard (put clients first). They just laughed and said they only call themselves financial advisors as it gets doctors to attend their dinner seminars where they pitched insurance products. Technically they were insurance agents, but told everyone their were Financial Advisors because people didn’t trust insurance agents. I wonder why!
  • Back when I was being trained a senior wirehouse advisor joked it cost $75,000 for a wirehouse to train a new financial advisor, but it cost clients $750,000.
  • My point – Definitely do your homework and verify your advisor is what they say they are.
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