Doctors, Lawyers, CPAs. More than just what your father wanted you to be when you grew up. They are our professions. Generally, trusted advisors who have advanced degrees and we recognize their expertise. We recognize that these individuals are professionals, trusted to give their best advice to patients and clients.
For a number of reasons, financial professionals still fall short of this benchmark. Industry consumers are confused. Advisors can sit in multiple roles with the same client – planner, advisor, broker, insurance agent. Sometimes as a fiduciary, sometimes not. Even the fiduciary standard isn’t a standard across all financial services practices. Many clients do not understand the difference between a captive broker, an independent broker/dealer representative and a registered investment advisor. Who can expect them to? A plethora of designations clutter our business cards. CFP. CFA. CLU. ChFC. CLTC. CSA. AIF. CRPC. CIMA. CPWA. Throw in an MBA for good measure. Do these mean anything to clients?
In many cases clients do not understand how their advisor gets paid. Commissions or fees? Even a fee quoted as a percentage of assets under management is not a clear figure to clients. What about insurance commissions? What are 12b-1 fees? What do mutual funds cost and who retains those fees? How does the custodian or broker/dealer make money?
And then there are our titles. Financial Planner. Financial Advisor. Wealth Manager. Wealth Management Consultant. Financial Consultant. Registered Representative. Financial Representative. I don’t even know the difference most of the time (if there is one).
Compare all of this to a CPA or attorney. CPAs: one designation. Typically their designation is their title. Attorneys: JD. Sometimes an LLM or MT to tag along. Partner, Associate, Of Counsel. Professionals who work hourly, for a flat fee or on retainer, occasionally on a contingency fee.
My industry has a long way to go before we can call it a profession. We need to reduce the clutter of designations: CFP and CFA would be a start. We need a true fiduciary standard across all of the industry, all the time. We need to eliminate hidden payments. Start with 12b-1 fees and No-Transaction-Fee platform fees. Quit talking about fees as a percentage and start talking about real dollars clients are paying for services. Be clear and honest (with ourselves and clients) about what services we are capable of offering and how clients pay for those services.
Maybe then we can work on earning the public’s trust. Maybe.
Bason Asset Management 