Caution Seniors: Beware Phony Credentials      Real Expertise Matters

by Hank Brock, CPA, MBA, CLU, ChFC

“Investors should beware of salespersons claiming credentials, such as ‘Certified Senior Advisor’ (CSA) that sound impressive, but require little training or skills,” so says the Utah Division of Securities (Division Newsletter, Oct., 2007.)

Credentials, expertise, education, experience and ethics matter, which is why those that work for years to achieve legitimate credentials scoff at those that attempt a short-cut to credibility.

The most popular legitimate credential in the financial planning industry is the Certified Financial Planner®, or CFP®. A much older, lesser recognized, but accredited college offers the Chartered Financial Consultant, or ChFC. Both require years of experience and adherence to a strict code of ethics. The ChFC actually requires the same six courses required for the CFP, plus two more. Those who’ve taken both the CPA and ChFC exams often comment that the tax exam for the ChFC is actually more rigorous than the CPA exam’s tax questions.

The Certified Retirement Financial Advisor, or CRFA, focuses on financial issues for seniors, and holders of both the CFP and ChFC may take the pre-approved CRFA courses to meet their continuing education requirements.

The complaint against other credentials, such as the CSA, is that they often may be “bought” with a fee, a quick 3-day class, and only a few hours focused on financial issues of seniors.

The Division warned against other ways a financial advisor may attempt a short-cut to trust, “Other times [trust] is implied because the promoter and investor both belong to the same church…” Many of the LDS faith are especially vulnerable when they are impressed by someone’s church connections. Reputable planners don’t “wear their religion on their sleeve.”

 

Nine Issues to Consider

First, is the consultant experienced? Ask about how many years he has been in business, what has been the nature of his practice and the types of problems he has solved, his existing clients, and the breadth and depth of experience. You may not think your issues are complex, but you are likely not aware of some of the strategies that could benefit you most, nor are they be understood by a novice. For example, it may take years of apprenticing to be ready to address the myriad issues facing seniors, so don’t be someone’s guinea pig. This is especially true in the area of tax and estate planning, where many novices present public seminars with only a basic understanding of complex issues.

Second, as mentioned earlier, what is your advisor’s educational background? Look for bonafide credentials such as ChFC, CFP, CPA, CLU, JD, or other legitimate credentials. These signify background in investments, taxation, estate planning, finance, business, insurance, law, economics, etc. and require comprehensive examinations from accredited educational institutions, years of experience, and advanced continuing education requirements. Beware of those that solely have one of the many “quickie” designations proliferating these days.

Third, does the advisor have a commitment to high ethical standards? Look for membership in at least one industry association (such as NAIFA, Society of FSP, FPA, IBCFP, etc.) that enforces a code of ethics. Of particular concern in ethics are those that not-so-subtly use their church affiliation in advertising.

Beware of those that resort to “announcing” their high ethical standards by implying some religious or church connection. A person will usually find that the advisor is relying on an “implied endorsement” or “short-cut” to gain trust and cover-up other deficiencies in his educational background. Members of the LDS faith have been cautioned by their leaders about this “short-cut” to trust, but all could benefit from this counsel. One’s church affiliation should not have anything to do with one’s competencies or ethics, so beware of someone that uses their church affiliation to promote their business. Unfortunately, many seniors look to church affiliation as a sign of trustworthiness, and fall prey to inferior services, and too often scams.

Fourth, is there a commitment to continuing education? Complex laws are ever-changing and the economy never holds still. How many hours are spent each year keeping skills sharp? Are the continuing education hours at a beginning, intermediate, or advanced level?

Fifth, what services do you need? Comprehensive retirement, tax strategies and estate planning? Solely tax advice? An investment advisor? Real estate advice? Or, is he just an insurance salesman? Identify an advisor that emphasizes the services you need.

Sixth, is your advisor a solo-practitioner? Or is your advisor part of a team that he can turn to for strategizing on complex issues? Or to bring an additional perspective? Is his firm large enough to provide the extensive resources as a large firm of pros?

Seventh, what’s the average client like? If your net worth is $500,000, and your advisor primarily deals with people with a net worth of $3-10 million, will you get the attention you need? Are there other advisors in the office that would give you better attention while still benefiting from the firm’s resources? Does the advisor primarily work with senior citizens, professionals, business-owners, or whom? Will your unique needs be addressed?

Eighth, how is the advisor compensated? Is he/she paid by fees only, commissions, or both? More about planner compensation in an upcoming article.

Finally, is your advisor a professional? Be wary of persons who are merely part-timers working out of the trunk of their car, lack membership in professional societies, omit commitment to continuing professional education, and criticize others who do commit to high standards. Often they will downplay the need for education, or boast they “know more about estate planning than most attorney’s out there.” Smooth salespeople are often very charming, and may even present a charismatic public seminar—but they may also be dangerous because they don’t know what they don’t know.

When you find an advisor you feel comfortable with and there is a philosophical “fit,” consult thoroughly, be loyal, and have fun. A successful advisor has excelled in his profession for the same reason anyone has excelled in theirs: because he loves what he does, and because of the people with whom he is privileged to work and help. He enjoys his rewarding relationships, and sincerely wants his clients to achieve the success they want.

Hank Brock is President of Brock and Associates, a local fee-based financial consulting firm that celebrates its 30th Anniversary in 2009.

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