What happens when you work at an independent broker dealer and surround yourself with “the good” financial professionals?
You forget about “the bad” and “the ugly.”
Get it? The Good, The Bad and The Ugly?
Ok I digress.
The point of this silly analogy is that I have, unfortunately, recently been reminded of the Ugly while working with a number of new clients who have purchased – actually, let me rephrase – been sold a financial product via aggressive sales tactics and false information.
Let’s just say buying two whole life insurance policies isn’t diversification.
In my opinion, a large part of the problem is that there are several types of financial vocations, so when it comes down to working with someone to help you manage your finances, it can be complicated and confusing. Titles include but are not limited to: Wealth Manager, Banker, Financial Advisor, Financial Representative, and Certified Financial Planner®.
To the consumer, it is hard to differentiate between the titles and easy to assume that they all offer the same professional expertise, education, experience or credentials. To make the matter more complicated, ask ten “Wealth Managers” or ten “Financial Advisors” to define their roles and you will almost certainly get ten different answers, with most heavily focused on investing.
The ease at which an individual can portray themselves as an advisor when they are really a salesperson is something that has always frustrated me about the financial services industry. To shed some light on the often murky relationship between clients and industry professionals, the Securities and Exchange Commission (SEC) adopted Regulation Best Interest, know colloquially as “Reg BI,” on June 30, 2020.
The SEC said these actions are "designed to enhance and clarify the standards of conduct applicable to broker-dealers and investment advisers, help retail investors better understand and compare the services offered and make an informed choice of the relationship best suited to their needs and circumstances, and foster greater consistency in the level of protections provided by each regime, particularly at the point in time that a recommendation is made."
In layman’s terms, this new set of rules helps consumers recognize the difference between receiving advice (a fiduciary) and being sold a financial product (a salesperson). In addition, it defines who can be considered a “Financial Advisor:”
- Only advisors holding licenses that allow them to be paid for advice (such as the Series 63, 65 or 66), or who have a professional designation such as CFP®, will be allowed to use the title “Financial Advisor” going forward.
- Financial salespeople will no longer be able to use the title “Financial Advisor” and must provide more cohesive disclosures about their fees and how they get compensated.
Where can someone obtain information about licensing, credentials, etc?
- FINRA Broker Check – a trusted tool that shows you employment history, certifications, licenses and any violations for brokers and investment advisors.
- FINRA also offers a database where you can learn about all the credentials and designations that you see behind the names of financial professionals.
Today’s challenging economy has increased the number of people looking for professional help. With so many options, now more than ever, it is important for consumers to do their due diligence and not just accept a financial professional at face value. I would encourage you to share this article if you know someone who may be in a complex situation, is unhappy with their current advisor or who just wants to make sure they are making smart decisions.
Take a little advice from Blondie, “Every gun makes its own tune.” Meaning that no two guns are exactly alike, even if they are the same identical model. Each has their own history and story to tell. The same can be said for every Financial Advisor. Even if they have the same degrees, credentials, designations, and years in the industry, they each have had different experiences, offer different skills sets or specializations, and provide different service models. So, take the time to find the best qualified person to serve your needs. Your financial future depends on it.