I like the new columns from Money Magazine featuring “The Mole,” an undercover financial planner. Like me, The Mole prefers to write anonymously to protect his or her identity. While my reasons for doing so pertain more with my desire to post sensitive personal information, The Mole maintains incognito status because he tends to speak out against the practices of his contemporaries and associates.
Some time ago, I considered publicly becoming a financial adviser or planner. Eventually, I decided it wasn’t the path I wanted to take, but the resulting discussion was interesting. So what does a would-be financial planner need in order to be hired and trusted by customers?
Perhaps a certification. The Mole says “maybe.” He has good things to say about Certified Financial Planners (CFPs), as he is one. This is a quality certification program with stringent requirements. Unfortunately, not all certifications require rigorous education and some have a loose grasp on ethics and fiduciary responsibility.
Now by my last count, there were more than 100 financial designations. Many, like the CFP, take a significant amount of time and expertise to master before the designation is awarded… Unfortunately, many of the others require nothing more than brief courses geared toward sales techniques; how to use emotions to sell annuities to seniors is a popular one.
A strong designation would reduce the chances your financial planner turns out to be sleazy like these annuities salesmen profiled by Dateline NBC.
However, even a designation like CFP does not guarantee the quality of the planner. Regardless of the designation, it’s best to get referrals from satisfied customers before selecting your financial planner. Don’t know anyone who is retaining financial advisory services? You can get referrals from the Financial Planning Association or the National Association of Personal Financial Advisors.
With referrals in hand, research your potential advisers with the North American Securities Administrators Association.
Walter Updegrave, another columnist for Money Magazine, submits the following:
I’d be wary of any advisers who contact me unsolicited, and doubly wary of ones who run free retirement-planning lunches or seminars. Many times such sessions are just a come-on to sell high-priced investments.
The lesson is to remain skeptical. If your adviser isn’t listening to your goals, suggesting products that are right for you, or trading frequently, it may be time to fire him or her, regardless of the adviser’s certification.
Do I Really Need a CFP? [Money Magazine]
Cracking the mysterious code of financial advisers [Money Magazine]
Updated December 20, 2011 and originally published May 9, 2008.