Chapter 11 of Lee Eisenger’s book, The Number, focuses on the topic of financial advisors. The author’s opinions of the financial advice industry is neatly summarized by the second paragraph of the chapter, paraphrased here:
There’s a giant and unruly industry out there ready to provide you with support and counsel. While this country may have a shortage of nurses, special ed teachers, and tool and die makers, it certainly does not lack for… financial advisers… all eager to make your acquaintace, impress you with their wisdom, and grab their share of the market. Most advisers present themselves honestly and forthrightly; some are a little funky and strange.
The financial industry places stock in the many certifications available to those wishing to be financial advisors, and the book lists 19 different professional certifications available in North America alone. Eisenberg asks about the usefulness of an organization and designation if the certification board does not police its members.
He brings up this point: When you deal with a trust officer, the bank assumes resposibility for your assets, but when you deal with a financial advisor, there is no such protection. “The most charitable thing once can say is that financial planning is still in its infancy, and regulation hasn’t yet caught up with it — that is, if you consider a big, strapping thirty-year-old still an innocent, babbling baby.”
Eisenberg sees big changes in the immediate future of the financial advising industry. One view is that there are too many financial service organizations lured into business in awe of the potential revenue from high-income clients. Just like doctors lost one-on-one relationships with patients when managed health care came into play, financial advice will continue to become commoditized with larger firms providing the service for tens of millions of customers.
Another view for the next ten years is that going to a financial advisor will become like going to H&R Block to file your taxes or to Jiffy Lube to get an oil change. Either way, or in a combination of both, Lee sees radical “wealth care reform” coming our way.
Updated February 6, 2012 and originally published December 4, 2005.