Randy Lee

By Randy Lee, CFP^®
 

If you are not old enough to recall the 1975 TV commercial for the Chrysler Cordoba, I refer you to YouTube. Ricardo Montalban talks about the “soft, Corinthian leather”. However, there’s no such thing as “Corinthian” leather. The term, used to make people believe this was a car of real luxury, was fabricated by Chrysler’s ad agency.

In contrast, the world of the financial advisor has no shortage of rules and regulations about advertising. You’ll not see an ad urging you to sit on a chair made of “Corinthian leather” while an advisor guarantees you a 20% annual return.

Trustworthiness is often cited as the most important characteristic people desire in a financial planner. That can only truly be proven over time. Until that crucial foundation is solidly laid, there are some ways to reduce the chance of regret.

The barrier to entry into the financial advisory line of work is pretty low. Real professional advisors seek ways to distinguish themselves from the less qualified. One way is to earn legitimate designations requiring academic achievement and demonstrated knowledge. Two such designations found in the financial planning world are CFP® (CERTIFIED FINANCIAL PLANNER) and ChFC® (Chartered Financial Consultant®). I’ll cover the CFP® because that’s the designation I hold and is most common at TrustCore.

To earn the CFP® designation one must complete individual classes in the fundamentals of financial planning, pass a 10-hour comprehensive exam, and meet the experience requirement of three years as a planner. The failure rate on the exam is around 44%. Only the serious need apply.

Unfortunately, there are organizations that sponsor watered down programs that, for a fee, will bestow some very impressive letters to go after one’s name. It’s really a case of buyer-beware when evaluating the real meaning of designations. Ask the advisor to explain the requirements to hold the designation. Besides the ChFC® and the CFP® certification, TrustCore planners hold almost a dozen other designations reflecting varied fields of expertise. No “Corinthian leather” here!

Look for a designation possessing a stringent code of ethics. A CFP® professional must act as a fiduciary. Simply stated, if a CFP® designee fails to put your interests first, he or she risks having the designation permanently revoked. In my opinion, business models at some financial services firms are not supportive of the fiduciary standard. Another lesser standard is the standard of “suitability.” Many products are sold that would legally meet the suitability standard but not the fiduciary standard.

In addition to the CFP® guidelines, individuals that pass the Investment Advisor Representative exam also have the responsibility to operate as a fiduciary. If a registered advisor fails to function as a fiduciary, he may lose the ability to earn a living as a financial advisor and may face other penalties. TrustCore planners are Registered Investment Advisors and are fiduciaries.

Wise consumers will take the time to understand the background and qualifications of any financial advisor, but don’t stop at checking out the advisor. It’s just as important to scrutinize the advisor’s firm.

Don’t be fooled by marketing hype. When’s the last time you saw a Cordoba on the road?