Spokane Journal of Business

Check what’s ‘under the hood’ of financial advisers

Recently adopted regs help differentiate between fiduciaries, salespeople

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When you board a plane, you trust that the pilots have the education and experience necessary to get you safely where you want to go. You take your car to the mechanic when it needs work and make an appointment to see the doctor when you are ill. But when it comes to hiring someone to help manage your finances, it becomes a little more complicated and less clear knowing whom to turn to. 

There are myriad financial vocations out there, and they all claim to have the highest level of expertise when it comes to managing your money. Although there are several types of financial vocations—wealth managers or bankers, for example—a fin–ancial adviser, a financial representative, and a certified financial planner are some of the most common.

For many con–
sumers, it is normal to think that these three terms refer to the same professional expertise, but there is a significant difference in their roles and in whose interests they represent. So, it’s no wonder that the distinction is so murky.

You may be surprised to learn that until recently, there was little federal regulation over the titles that advisers could use. So, for the consumer, there was no straightforward way to know the amount of education, experience, or credentials an adviser had just by looking at their title.

To help make it more clear for the consumer, the Securities and Exchange Commission adopted Regulation Best Interest on June 30.

Reg BI, in a nutshell, will help the consumer differentiate between salespeople and fiduciaries. Financial salespeople will no longer be able to use the title “financial adviser” and must provide more cohesive disclosures about their fees. Reg BI also states that broker-dealers and their agents must sell in a customer’s best interest when making a recommendation in a brokerage account.

So, what does this all mean?

With the implementation of Reg BI, consumers will have a much easier time checking under the “hood” of the financial professional’s career. It certainly will help differentiate between financial representatives, financial advisers, and certified financial planners, but read on to get a better understanding of the difference between these three vocations.

Financial Representative: A salesperson who is paid to provide financial information. This can be anyone from stockbrokers to bankers. The broker-dealer they represent often creates products, and the salesperson is selling that product to the consumer. These financial representatives are usually employees of their bank or broker-dealer. To sell financial products, the salesperson often needs to pass a few tests and complete state licensing. Although these tests ensure a minimum level of knowledge, they don’t compare to the rigor and depth of the certified financial planner coursework and examination.

Financial/Wealth Adviser: A financial adviser is a professional who acts as a fiduciary and places the clients’ interests above their own. Those advisers can provide services for a fee.

Certified Financial Planner: A certified financial planner is a financial adviser who has obtained the CFP designation and holds a bachelor’s degree or higher from a university. The CFP designation is one of the most prestigious financial certificates. To get this designation, certified financial planners must pass a rigorous six-hour exam, take courses covering the 100-plus various topics that the CFP exam covers, and continue to meet ethical and continuing education requirements each year. It also requires five years of service to be able to use this designation professionally.

Those three letters – CFP – show that someone is qualified in financial and investment planning and will provide fiduciary advice to their clients. There are many do-it-yourself financial “experts” out there, and the CFP designation helps protect the consumer from predatory financial “advisers” looking to make a quick buck.

Thanks to Reg BI, it will be much simpler to do your research to find the best-qualified person to serve your needs. When looking to hire a financial professional, I encourage you to investigate them thoroughly. Although having the CFP designation is a solid indicator of a knowledgeable financial adviser, it should not be considered the end-all. A newly minted CFP is much like a freshly graduated med student: He or she may be a doctor, but they haven’t developed the depth of real-world skills they need to be on their own. Career success comes from experience, time, and specialization, just like it does within any other professional sector.

With the economic market continuing to grow more complex and volatile, planning and investing needs will be driven up as people look for professional guidance. With so many bad players in the game, now more than ever, it is so vital to not accept a financial professional at face value. Don’t become a victim of investment fraud. If you are being pressured by a financial professional to hurry up and make a decision to give them your business and discouraged to take the time to do your due diligence, I strongly advise you to seek services elsewhere.

To get a snapshot of a broker’s employment history, regulatory actions, and investment-related licensing information, including arbitrations and complaints, check out the website https://brokercheck.finra.org/.

Sarah Carlson is the owner and founder of Fulcrum Financial Group LLC, of Spokane. She can be reached at 509.747.2075.

Sarah Carlson
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Sarah Carlson is the owner and founder of Fulcrum Financial Group, of Spokane. She can be reached at 509.747.2075.

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