Finance, Insights

Financial Planning and the New Economy


As we walk into this brave, new world of investing and financial advice after the Great Recession of 2007 to 2009, people truly want more than just a stock pick. With the waning interest in “Robo-Advisors,” it is clear the public still wants good real people to provide good real advice. There are many good people in financial services. However, when we look at the industry, it can seem more confusing than ever when it comes to getting financial advice. What does it all mean, and what questions should I ask?

What are your qualifications?

Registered representatives, also called stockbrokers, investment representatives, and bank representatives, are paid commissions to sell investment and insurance products. Their primary sales licenses are Series 6 or Series 7.

The Series 63 is a securities license entitling the holder to solicit orders for any type of security in a particular state.

The Series 65 is a securities license required by most U.S. states for individuals who act as investment advisors or financial advisors. The Series 65 exam, called the Uniform Investment Adviser Law Examination, covers laws, regulations, ethics and topics such as retirement planning, portfolio management strategies and fiduciary responsibilities. The Series 66 exam is a combination of Series 63 and Series 65, but since a prerequisite for taking the exam is successful completion of the Series 7 exam, it does not include the product, analysis and strategy questions that are a large part of the Series 65 (which are already part of the 7).

Financial advisors who work for companies called Registered Investment Advisors (RIAs) are called Investment Advisor Representatives (IARs). They are compensated with fees and are financial fiduciaries so they are held to the highest ethical standards in the financial services industry.

Money managers have the same registrations and characteristics as financial advisors. Their distinguishing feature is that they make decisions for investors without their approval in advance.

Financial planners are a tough category. There are no licensing requirements for a person to call him or herself a financial planner. Anyone can claim to be a financial planner whether it is true or not. There are different certifications that can signify a person’s level of experience and expertise.


Certifications for Financial Planners

This is not an exhaustive list, but includes the most common certifications financial planners will pursue to better assist their clients with their unique needs and goals

Financial Planning Intermediate Level Certifications

·       AAMS Accredited Asset Management Specialist: general certification for financial advisors on investments, insurance, tax, retirement, and estate planning to provide recommendations based on all aspects of a client’s total financial picture.

·       AWMA Accredited Wealth Management Advisor: addresses complex financial issues faced by affluent clients.

·       CDFA Certified Divorce Financial Analyst: provides specialized training to accounting, financial, and legal professionals in the field of pre-divorce financial planning.

·       ADPA Accredited Domestic Partnership Advisor: focuses on the unique needs of domestic partners including LGBT and heterosexual couples who have chosen not to marry.

·       ChFC Chartered Financial Consultant (ChFC) financial planning needs of individuals, professionals and small business owners including insurance, income taxation, retirement planning, investments and estate planning.

Financial Planning Advanced Level Certifications

·       CFP professional certification mark for financial planners conferred by the Certified Financial Planner Board of Standards (CFP Board) in the United States, and by 25 other organizations affiliated with Financial Planning Standards Board (FPSB), the international owner of the CFP mark outside of the United States. To receive authorization to use the designation, the candidate must meet education, examination, experience and ethics requirements, and pay an ongoing certification fee.

·       CFA Certified Financial Analyst The program covers a broad range of topics relating to investment management, financial analysis, stocks, bonds and derivatives, and provides generalist knowledge of other areas of finance.

·       CPA/PFS Certified Public Accountant with the Personal Financial Specialist Credential: CPA with the combination of tax expertise and knowledge of financial planning.

·       MBA in Finance Master of Business Administration with a focus in finance: Finance degree programs at the master’s level prepare you to assume roles of greater responsibility, including management and executive positions. An MBA in Finance does not necessarily prepare a person to be a financial planner, but in combination with other certifications shows a dedication to learning.

This is not an exhaustive list, but includes the most common certifications financial planners will pursue to better assist their clients with their unique needs and goals.

What experience do you have?

How many years of experience a person has is just as important as the letters behind his or her name. Someone who has had 5, 10, or 20 years of hands on experience “in the trenches” helping clients is just as, if not more important, than all the book smarts in the world.

Get to know the person. Think of it a bit like a first date. This is a person who you will be leaning on for advice, and who may be guiding you for years. Why did the financial planner get into the business? What are the financial planner’s goals for the future of their business? If I need to reach you, what is your availability, what days, what hours? Do you charge each time I call, or will I have to talk to your assistant most of the time?

What services do you offer?

The services a financial planner offers will vary and depend on their credentials, areas of expertise and the firm for which they work.  Some planners offer financial planning advice on a range of topics but do not sell financial products, while others provide advice in specific areas such as taxation. Ask the financial planner if they are a fiduciary. A fiduciary must act in the best interest of their clients. Anyone who cannot claim fiduciary status must disclose any conflicts of interest such as bonuses and special payouts for selling certain products or producing a certain volume of transactions, new assets brought to the firm, or gaining commissions for selling a product.

What is your approach to financial planning?

The types of services a financial planner will provide will vary. Some planners prefer to develop detailed financial plans encompassing all of a client’s financial goals. Others choose to work in specific areas such as taxation, estate planning, insurance and investments. Ask whether the individual deals only with clients with specific net worth and income levels, and whether the planner will help you implement the plan they develop or refer you to others who will do so. If you’re keen to deal with a firm which puts real Financial Planning service at the heart of its service to clients, you will want to search out a firm that is a Registered Investment Advisor. The advisors working for these firms do not receive commissions for selling product, but rather a fee that is either based on assets managed, or on an hourly basis.

Will you be the only person working with me?

It is quite common for a financial planner to work with their team to provide the full Financial Planning service to you. You may want to meet everyone who will be working with you and this will often involve money managers, back office administration, and Paraplanners. These are professionals who work to support the Financial Planner, providing technical research and backup as well as report writing and analysis.

How will I pay for your services?

There is not, and never has been, such a thing as a free lunch, or free financial advice. Your planner should disclose the cost of their services in writing in advance of them starting to work with you, so you are clear on this as well as how they will charge you for the services they will provide.

You will also want to find out other costs such as administration or annual costs, money management cost, transaction costs, and security or fund internal costs (hidden expenses). EVERY investment will have costs in some aspect (if someone tells you that you don’t pay these costs at all, RUN). Transparency and effort on the part of the financial planner to openly explain these costs, the value you are paying for, and what the financial planner does to minimize these expenses while still maintaining the quality you are looking for in financial advice.

How much do you typically charge?

Although the amount you pay the planner depends on your particular needs, even at an early stage in the process the financial planner should be able to provide you with an estimate of costs based on the work they will be carrying out for you.

How are you regulated?

In the United States, the main regulating bodies are the SEC, FINRA, and state insurance agencies (for investment representatives and financial advisors who also sell or advise on insurance)

Registered representatives, stockbrokers, investment representatives, and bank representatives:

Investment Advisors:

How often do you review my situation?

Good financial planners will make sure that they review your situation at least annually. Many will do so more frequently, but a thorough review once a year is sufficient to ensure that your plan keeps up to date with your changing circumstances.

Can I have it in writing?

And finally, be sure to ask the planner to provide you with a written agreement that details the services that will be provided.
Sources used to create this summary: Wikipedia, Investopedia, Forbes, The College for Financial Planning, SEC, FINRA, CISI