Will The Real Financial Planner Please Stand?

The TV series “Whats My Line” featured a real professional or practitioner and two imposters, and the audience was challenged to select the real one after a series of questions was posed to all three. Sometimes the audience got it right, but often the imposters were so good the audience failed to spot the real McCoy. There appears to be a growing feeling today that the public, like the audience of “Whats My Line,” now is being challenged to distinguish between real financial planners and imposters.

Given the wide range of disciplines that are merging into this amorphous business we call “financial services,” the concern is understandable. Many, if not most, insurance people feature some reference to financial services on their business cards. My CPA is a financial planner and regularly sends me offers of assistance in this area. My stockbroker does financial planning. Many lawyers offer financial planning and most who do sound more like stockbrokers. At last count there are at least 70 designations in use and the number is growing.

Most of these people are no doubt talented and able–but I do not believe any bring to the table the full range of knowledge the term financial planner implies, with the inevitable result being a bias toward their primary discipline. I do not say this in a disparaging sense, however, for in a way this is what competition is all about, and the public may be well served by the system.

Actually, the only real problem I have is with the “fee only planners” who do not disclose that they have ties to the companies that sell the products they recommend, and in my view they are the real imposters.

But back to the problem of who is the “real” financial planner and how he or she can be recognized. In November 1984 I wrote an article that was published called “Whats in a Name,” and it dealt with the problem the term financial planning was causing at the time. The central thrust of the article was to point out that financial planning was an evolutionary process.

Insofar as the insurance business is concerned it probably started in the 1930s with simple “programming” of a persons insurance and other assets. In the post-war era this expanded into pension and estate planning, executive compensation and, more recently, capital needs analysis and financial needs analysis. But the nomenclature of the practitioners also evolved and their business cards revealed a whole variety of purported specialties. And then the term financial planning arrived on the scene and thus, struck a harmonious chord with most if not all disciplines.

The introduction of financial planning was not without its problems. In 1985 the North American Securities Administrators Association (NASAA) raised concern over the number of shady schemes being marketed under the banner of financial planning. One, in particular, that I remember the NASAA highlighted was called “Rex Rabbit.” This entailed the sale of interests in a venture to raise super-rabbits that had a pelt like mink and flesh that, when freeze dried, could be sold to Korean mercenaries guarding Saudi oil fields for $16 a pound. Crazy? Yes, but 40 investors gave a self-proclaimed financial planner $1 million to get in on the ground floor.

At about the same time the hot investment of the day was “options.” You could buy options on everything from pistachio nuts to silver, again from self-proclaimed financial wizards. At the time I was president of our local Better Business Bureau and because we were getting a lot of complaints, our report on the practice was extremely negative.

A group representing the silver option people asked for a meeting with the Bureau to plead their case so that we would ease up on them. Accordingly, I arranged the meeting and about 30 companies attended along with two men from the attorney generals office who were not identified. The meeting was incredibleas the discussion went around the room each company related why it was legit but everyone else in the room was a crook. The next day, armed with this information, the attorney general shut them all downthus, ending a dark chapter in our area.

Because of these and many other such problems the CFP organization, the new kid on the block at that time, proposed as a solution the creation of a “Self Regulatory Organization” (SRO) wherein financial planners would be regulated. The proposal was widely viewed at the time as self-serving to the CFP people and it went nowhere.

However, the primary reason the proposal failed was because of the notion that the proposal served more to protect the name “financial planner” than the public at large. It might have punished someone committing fraud under the banner of financial planner-but a person could avoid it if another nomenclature was used.

I return to my original propositionnames evolve just as businesses and professions do. Financial advisors are common today and who knows what will be in vogue tomorrow? The public is best protected from fraud by effective product regulations and market supervision. Scalawags always can find a banner under which to operate that appears to imply legitimacy, and SROs of any kind will accomplish little by way of curbing such imposters.

Moreover, designations gain prestige and acceptance by the public more by the conduct and expertise of the holder than by fiat issued by an organization.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.