January 19, 2012

Advisors Mistakenly Self-Identify as Financial Planners: Cerulli

More provide services in investment planning than in financial planning

Most advisors see themselves as financial planners, when the services they provide fall more into the investment planning category instead, according to a Cerulli survey.

During production of its annual "Quantitative Update: Advisor Metrics," a sourcebook for data and analysis on advisors' practices that has been in circulation for seven years, the discrepancy was discovered, according to the company. While in its annual survey to advisors 59% classified their practices as financial planning, based on services offered, only 30% of advisors actually met the criteria for that characterization.

In the survey, advisors are asked to specify the services they offer and provide information about their client base, as well as to categorize themselves as money managers, investment planners, financial planners or wealth managers. Based on analysis of offered services and the data on their client bases, 56% of respondents had the characteristics of investment planners rather than financial planners.

According to the report, many practices provide some basic elements of financial planning, but are more exclusively focused on asset accumulation strategies.

In a statement, Scott Smith, head of Cerulli’s intermediary practice, said, “Firms have encouraged their advisors to expand their advice relationships with clients; however, advisors tend to overestimate the degree to which they are involved in the planning process. The movement to extend advice services is likely being accelerated by turbulent markets, as advisors who base their value to investors on investment performance have suffered more than those with broad advice relationships.”

According to Cerulli, investor implications could be significant. The company adds that, without industrywide consistency in the nomenclature advisors use for their practices and services, lack of clarity about which services an advisor actually offers investors is likely to continue.

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