Who Would You Recommend?

Journal of Financial Planning: January 2013


Dan Moisand, CFP®, has been a practicing financial planner since 1991. He is a principal at Moisand Fitzgerald Tamayo LLC in Melbourne, Florida, and former president of the Financial Planning Association.

It is worse than I thought. Much worse, actually.

A recurring theme of these columns over the last several years has been that for financial planning to be considered a true profession, certain criteria needed to be in place. I have tried to emphasize why each of these criteria is important to the public. After all, the public is the ultimate beneficiary of professional services. In this effort, I often lament how difficult it is for John Q. Public to find a competent and ethical financial planner. I was reminded just how challenging it can be when I was asked by a friend for a recommendation.

I love helping people. It is what I do for a living, and when I can help a friend, it truly brings me joy. In this case, however, the dominant feeling was discomfort. At the moment he asked, I was rather excited at the prospect. I’ve been fortunate to have forged friendships with outstanding, honest financial planners all over the world. How hard could this be?

My friend, like me, prefers a relationship between planner and client to be one of geographical proximity so face-to-face meetings can occur easily. Unfortunately, my friend lives in an area of the country far removed from anyone I know well. So I was tasked with helping my friend, knowing nothing about the planners in his area.

The first frustration came from the “find a planner”-type search functions on the websites of CFP Board and the three associations to which I belong (FPA, NAPFA, and the Society of Financial Service Professionals). All four of the sites permitted me to search based upon ZIP code. All offered some of the information I was looking for but only some. Eventually, I managed to narrow 15 candidates to a list of six finalists I wanted to know more about. I never expected to be able to explicitly recommend any of them just from the information on the sites, but I was surprised at how little comfort I could draw from the information provided.

Marketing Tips

While all the sites have room for improvement, two elements contributed to the difficulty I had. The first is that financial planners are terrible at marketing. Keep in mind, I am far from a marketing expert, but one does not need to be a marketing expert to see just how bad the planning community is in this area. Here are some quick tips before I get to the second contributor to my frustration.

  • If the site allows you to describe your clients, your practice, your specialties, or yourself, for Pete’s sake, say something. A listing that is little more than name, address, and phone number isn’t interesting or helpful to anyone.
  • If you do say something, try to word it in plain English rather than jargon or tired clichés like, “We will help you reach your goals.” That may be true but it gives no hint about whether you may be a good fit for a client. Also, no one believes you have a high level of expertise when your list of “specialties” is 20 items long.
  • Review your web presence. At first, I thought planners who did not have a website were making a big mistake until I saw some of the websites that did exist. Cheap website templates look cheap.

Regulatory Structure an Obstacle to Finding Competent Help

The bigger contributing factor to the difficulty in searching for a financial planner is something the planning profession has been trying to address. In fact, the planning profession has been the only party trying to address the issue and I believe will be the only party continuing the effort. Our regulatory structure is not conducive to helping people find competent and ethical financial help. Like bad marketing, this is probably no shock to readers of this publication.

The public can get plenty of “questions to ask a financial adviser” materials but most are horribly superficial. I, on the other hand, know some of the best financial planners in the world, quite literally. I know what questions to ask and, more importantly, what to do with the answers. It should have been a piece of cake.

All 15 candidates were CFP certificants. At our firm, having the right to use the marks is a minimum requirement for any position that gives advice to clients, so I made it a minimum criterion in this search. Part of me does not like this because I know many competent, ethical financial planners who are not CFP certificants, but because I was dealing with total strangers here, some minimum criteria needed to be in place and CFP marks struck me as the most appropriate.

In some cases, I could tell that candidates did not practice financial planning even if their marketing materials implied otherwise. Materials would tout how financial planning is important and that the financial adviser/wealth manager/wealth coach, or whatever title was being used would “help people with their planning.” This is fine unless the discussion about planning is a way around the fiduciary standard that can attach to explicitly stating one is a “financial planner,” or an outright bait and switch for product sales. In most cases, even being an expert in the field, I couldn’t tell. Further exploration was required.

Whether any financial planning was actually performed and how it was done was a large part of the interviews I conducted with the finalists. Two of the six put on a good show on their websites but really offered little more than investment management in one person’s case and insurance in the other. I was left feeling less than comfortable with both their competence and their ethics.

Questionable Ethics?

I don’t think all persons holding out as planners or as providing planning should necessarily be required to perform comprehensive financial planning for all clients. However, regulatory bodies have done a poor job of addressing the bait and switch. In addition, no regulatory body gives a hoot about whether the planning meets any kind of standard of practice. This is actually fine with me because no state regulator, the SEC, or especially FINRA, has shown any competence regarding financial planning anyway. CFP Board cares, but their ability to affect behavior is limited.

On the topic of ethics, there were several challenges. Compensation method does little to inform me about a person’s ethics. It tells me what conflicts may or may not exist, not how a planner manages those conflicts. I wholeheartedly believe that the fee-only approach eliminates many important conflicts, but I also believe that despite the flaws in a non-fee-only environment, it is possible for the conflicts to be managed appropriately by an ethical practitioner. Doing so is a large part of the very definition of the term “ethical practitioner.”

The CFP Board website is kind enough to post any disciplinary matters or lack thereof. However, having served as chairman of the Discipline and Ethics Commission, I know fair process takes time. There is usually a considerable amount of time between the occurrence of a transgression and the appearance of the discipline on the CFP Board website. FINRA is horribly opaque about firms and reps. The basic background checks I conducted impressed upon me how, even if everything checks out, the consumer is still taking a leap of faith.

One of the finalists seemed to think that if his firm approved something, it must be okay. He was unconcerned about whether the brokerage firm with which he was affiliated was touting products to him based on merit or extra revenue to the firm. He kept telling me he was “independent,” but twice pointed out that he could not put his clients in anything with which his company did not have a sales agreement. I was looking for diligence and independent thinking and got neither. When consumers hear “independent” do they think independent contractor versus W-2 the way the industry means it? I doubt it.

The Public Needs True Licensing

Basically, I ran into the same problems the public does. Regulators ignore marketing that presents salespeople as advice givers. Titles mean nothing and designations only get you so far. There is little assurance the person will perform any actual financial planning and if even if they do, the regulatory standards they must meet are dictated by their licensing and cover only whatever subset of planning is applicable.

The public needs to be able to easily identify practitioners who have an adequate level of financial planning knowledge and are expected to put that knowledge to use toward serving the clients’ best interests. The public needs a mechanism to truly hold the bad actors accountable. A true license could do this. The thousands of us good guys and gals would benefit from the public’s recognition of our accountability.

I found my friend a planner (an FPA member affiliated with an independent B-D, by the way) but really, it should not have been so hard, taken so long, or required the seeker to have such extensive knowledge. If you got such a call, who would you recommend?

Practice Management
Professional Conduct & Regulation
Professional role
Marketing & Communications