So You Call Yourself a Financial Advisor…Would Investors Agree?

By Amy McIIwain, President, Financial Social Media on Wednesday, March 30th, 2011

Pending the congressional decision on the establishment of a common fiduciary standard for all financial advisors, at least for now, being a financial advisor does not necessarily mean being a fiduciary. From an industry standpoint, that is. I did an ad hoc survey last weekend at a group gathering with friends outside the financial services industry, and it was interesting to find that, by description, what we in the industry would refer to as “adhering to the fiduciary standard”, many investors would simply call “being a financial advisor”. With this discrepancy in books between advisors and investors where the definition of “fiduciary” in ours appears next to the word “financial advisor” in theirs, from the investor’s point-of-view, anyone with the title “Financial Advisor” on their business card is inherently expected of the following:

  • Possesses the knowledge and experience to recommend “suitable investments” based on the investor’s financial position, risk tolerance, etc.

  • Always looks out for the best interest of the investor regardless of how they charge, fee-based or commission.

  • Understands and monitors all of their clients’ investments including insurance policies, retirement accounts and education plans.

  • Assists the investor with goal planning, and monitors the progress of these goals.

  • Communicates with the investor in a timely/regular basis on market activity, investment strategy changes, and performance reporting.

To investors, financial advisors who are not viewing assets in a holistic fashion, and who manage “their book only” are not financial advisors—they’re asset managers. An advisor who is paid on commission-only basis for selling instruments (stocks, bonds, insurance, etc.) is also not what an investor would label a “financial advisor”, but rather a “stock broker” or “insurance broker”. These are the titles that used to be used—lines that were drawn long ago that which, though may have blurred within the industry, still remain intact to the outside investor. Not to say that there’s anything wrong with being an asset manager, stocker broker or insurance broker, but if you are, those are the titles that should be on your business card; not “financial advisor”.   And if your business card does say “financial advisor”, know that investors will most likely expect you to maintain the common requisites of the fiduciary standard.

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