When is a Financial Planner Not a Financial Planner?

A recent study from the industry research firm Cerulli Associates evaluated advisors across all business channels and compared how they title themselves with how they actually do business. The result: 59 percent of advisors described themselves as a “financial planner,” but just 30 percent of those advisors actually practiced “financial planning.” In the registered investment advisor (RIA) space, that percentage was slightly higher at 35 percent. And, not surprisingly, the percentage was the lowest, 23 percent, among wirehouse brokers.

Apparently, even advisors who had planning designations such as the CERTIFIED FINANCIAL PLANNERTM (CFP®) license and the Personal Financial Specialist (PFS) designation often neglected to do a comprehensive financial plan before offering investment advice.

Additionally, the study found that just 22 percent of advisors considered themselves to be “investment planners,” or offering advice on investments alone. Yet, after studying the advisors’ work, Cerulli found the percentage of “investment planners” to 56 percent, more than double the advisors’ estimate.

What does that mean for the consumer of financial advisory services? Just as you cannot judge a book by its cover, you can’t judge an advisor by his or her title. Take the time to really interview any advisor you are considering working with. At our firm, the financial planning and investment management work go hand in hand. And, frankly, that’s the most effective, beneficial way to work. You’ll find a list of useful questions to ask any potential financial advisor at Focus on Fiduciary.

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