Wherever you are in your career as an advisor, the quest for in-depth knowledge never ceases. One path to excellence is graduate coursework that results in a master's degree or professional credentials from an accredited university. Since 1927 financial professionals have earned some of the industry's most prestigious credentials from The American College in Bryn Mawr, Pennsylvania. Originally named The American College of Life Underwriters, its Chartered Life Underwriter (CLU) designation is still the mark of the elite insurance professional.
Larry Barton, PhD., is president and CEO of The American College. Barton, a Fulbright Scholar, author, risk expert, and former Harvard Business School faculty member, talked with us about how advisors can design a brilliant career. Some of his advice is surprisingly simple. "Treat the client as you would want to be treated. That is a simple, wonderful, prosaic premise on which to build a thriving practice. If you keep the client's needs before your own, chances are you're going to have a multiplier effect, not only will they be happy and return to you for additional products and services, but they will recommend you to others," says Barton.
What are the risks for financial planners and investment advisors today? There's an overdose of anxiety with regard to compliance by the financial advisor, who for the most part, is doing a magnificent job of meeting the needs of their client. They are doing it in an ethical manner, creating the models upon which future wealth will be built and current wealth will accelerate, but because of problems largely at the top of some companies, there is a paranoia that is overshadowing daily activities. From a risk perspective, [this can] curb innovation and the genuine, enthusiastic, entrepreneurial spirit upon which the industry was built. I would urge everyone to keep compliance and ethics at the front of their thinking.
What do you believe is the next challenge, after compliance? Overall, [it's] training and education. I'm deeply worried that there are over 80 different designations available for advisors, most of which come from for-profit companies. You can now go to a hotel, take a course, take one examination--usually multiple-choice--and in three days walk out certified in some area of specialization, and all of a sudden have some initials after your name on a business card. That's frightening to me as an educator, I think it's frightening to the regulators that are beginning to ask about this process, and ultimately it should be frightening to anyone who believes in the notion of an honored profession, where people study for many hours, and typically many years, to receive a credential that the public will recognize. I would urge investment advisors to look at the Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or Certified Public Accountant (CPA) as the standards of excellence.
Is this part of the confusion about names for registered representatives? Let's call it what it is--confusing. Some of these designations are very useful, create real value; they're not all bad. But what about the client, what about the risk to the industry? This is a very significant risk, because just like after-hours trading, I'm afraid all advisors will be branded in headlines, and that's not fair to the honest ChFC, to the credible CFP, to the diligent CPA.
Do you consider those three designations as the core? No, I think the RIA is a very substantial designation--the CLU for the insurance base--there are a host of fine designations out there, but I think any honest individual would have to question the validity of some of them.
How would you structure an ideal curriculum for advisors? There's an excellent designation that we offer through NAIFA (National Association of Insurance and Financial Advisors), called FSS, Financial Services Specialist. It's a six-course designation, with six different examinations. It includes how to grow your career, serve clients, the mix of products that are available through financial advisors, and it explains the investment cycle. If you start with FSS, which most advisors would complete in a year to 18 months, then you would move on to a CFP, a fine program with great brand recognition among consumers and a rigorous examination. A ChFC after that is the gold standard for the industry, because it is eight courses and eight examinations. It goes beyond the CFP into business planning as opposed to consumer planning. The ChFC is really to help the business owner grow their enterprise, look at business and succession planning, and the tax consequences of managing a business. After that, I would look at one of our master's degrees at The American College or a master's degree from another accredited university, either in investments or in financial services.
Two to three days in a Holiday Inn is not the way to grow a career, because you'll be cheating yourself, and I believe in my heart you'll be cheating your clients. The insurance commissioners are calling and asking questions about these designations; the attorneys general are asking. I would ask those entrepreneurs that are thinking of becoming educators--can you defend your actions in The Wall Street Journal?
What ideal curriculum would you design for the newer advisor? There are two wonderful entry programs for the young advisor. The FSS I've mentioned is superb. The other is LUTC, for those who want to specialize in insurance products. The LUTC is very useful in the annuities space--it's not just life insurance, it's annuities and investments. Both of those programs are excellent entry points for a new advisor.
Once someone's got the right credentials, how would they prepare to serve baby boomers who are starting to withdraw from retirement accounts? First, know your competition: some very fine Web sites have been created by Vanguard, T. Rowe Price, Fidelity Investments and others. The average middle market consumer is considering, "What do I do with my inherited funds and my SEP IRA and my Roth and all the money that I've accumulated in my 457?" They are going to mutual fund Web sites to try to determine, "Will I have enough money to boost my quality of life, knowing that I will live longer?" Baby boomers will look at those Web sites, and buy books by Suze Orman, and others. Your mission as a financial advisor is to have a differentiating quality because this is not just about a number, [as in] "You will need $6,800 a month for you and your spouse to have a good life." This is about options, issues like disability insurance, long-term care, and where you want to live. It's about the kind of legacy you want to leave your children or your favorite charity, and that will not be addressed in a Web survey.
This is not about just a Monte Carlo simulation; it's about quality of life. That's where a great investment advisor can say, "I'm glad you looked at a Web site, and I'm delighted you've done some research that's basic. Let me now explain to you where I see my clients creating additional wealth, where they're building upon what they've inherited, or what they've earned. Could I run some scenarios by you, such as what if you or your spouse were to have a stroke or become disabled?" This is the value added of a great investment advisor, and it's something you'll never get from 20 questions on the Web.
How should advisors help baby boomers prepare for the enormous amount of wealth that they are about to inherit? There's a reason why we go to our doctor and dentist twice a year. A great advisor should be pushing for twice-a-year meetings, face-to-face as opposed to a phone call. When you are in front of a client, even for 20 minutes in their office or home, you have an extraordinary moment to explain cases. Families love to hear about what other families are experiencing, good, bad, or indifferent. Don't focus on the horror stories of how people lost wealth, focus on the success stories of how you helped comparable clients build their wealth or create additional opportunities in terms of estate planning. Understand that your clients are going to inherit significant wealth. The good news is that most of them have not begun to think about whether they are going to retain the farm, or the tax consequences of every action, or about valuation, or inheriting a family estate or business that may have a street value of $400,000.
How do you see the demographics of the industry changing? The number of women studying at the college is up about 25% in the past three years. That's a magnificent rise in terms of women either entering the investment space or re-entering the workforce. That's superb for all of us because women tend to be superb advisors, and we know from a track-record perspective, tend to be better investors, so they're better role models.
What are women who invest looking for in an advisor? We ran three programs last year specifically on women and the investment community. One had banks and broker/dealers and the other two were very specific in life insurance. In very general terms, women tend to be very holistic investors, very prudent, and want to hedge their bets, and not invest solely in [one product]. That is important because an advisor who traditionally only sells annuities or 529 Plans may not find [women to be as receptive to that]. Women tend to be much better-read. They do a considerable amount of research on investment vehicles, where men tend to be much more reliant on the verbal client presentation.
Women are doing better than men right now in the sciences. This is a significant turn just in terms of the behavioral sciences. Psychologists are trying to figure out why this is. They're better with numbers, better with science, and appear to be, based on what we're seeing and hearing, much more financially literate than the industry gives them credit for.
What else should advisors be thinking about? Never ever forget that trust gets reinforced by the little things in life.
Staff Editor Kate McBride can be reached at firstname.lastname@example.org.