Is your adviser touting questionable retirement-planning credentials? Just last week the Massachusetts Securities Division fined LPL Financial $250,000 after an investigation into the use of senior designations by some of the firm’s representatives. Here’s what you need to know if you’re considering hiring someone for retirement help.
If you were looking for guidance with your retirement planning, would you be more likely to hire someone if his business card stated he was an Accredited Retiree Counselor? How about if he were a Qualified Retirement Strategies Specialist? Or a Certified Retirement Planning Expert?
I hope not, because I just made them up by writing dozens of words like “retirement,” “accredited,” “specialist,” etc. onto little slips of paper, tossing them into a bowl and then drawing them out at random. Which illustrates a fundamental quandry: Given the dozens of official-sounding designations out there, how can you tell whether a string of impressive titles represents real retirement-planning know-how or is a marketing gimmick designed to imply expertise that isn’t there? I have three suggestions.
1. Demand details about the designation. Don’t be shy. Just say you’re naturally skeptical of such titles in light of the recent National Senior Investor Initiative report from the SEC and FINRA and an earlier study from the Consumer Financial Protection Bureau that raised questions about senior designations. Among the questions you should ask: What organization issues the credential? What makes that organization credible (Is it accredited? If so, by whom?) How long did it take to get the designation and what was required (how many hours of study, on-site or online course work, a final exam)? Is continuing education required to maintain it? Basically, you want to know that the adviser isn’t effectively trying to buy credibility.
2. Vet the adviser. I don’t care how extensive an array of designations an adviser holds, you still have to do some due diligence to make sure the adviser hasn’t had a litany of complaints clients and/or run ins with regulators. A good place to start your digging into the adviser’s background is the Check Out A Broker or Adviser section of the Securities and Exchange Commission site, which has detailed information on how to research the background of all types of advisers—brokers, financial planners, investment advisers—plus other resources, including links to FINRA’s BrokerCheck system and state securities regulators’ sites.
3. Listen to your gut. Although there’s always the risk of being duped by a Madoff-like investor who’s a complete fraud, the more likely scenario is that you end up doing business with an adviser who’s willing to boost his bottom line at the expense of yours. To lower the odds of that happening, spend some time with the adviser to find out exactly what he intends to do for you and what his products and services will cost.
Start by getting a sense of how he operates: Does he make his living mostly by selling a limited range of products from a restricted menu offered by his own or affiliated companies? Or can he pick and choose investment options from a broad range of firms? You also want to find out exactly how is he compensated—solely by commissions, by annual or hourly fees, a combination of fees and commissions? Each method has its advantages and drawbacks (although I think paying fees for advice has less potential for conflicts of interest). But whatever system the adviser uses, he should be able to provide you a written estimate of his fees and any other charges upfront.
Ultimately, you want to deal with an adviser you feel you can rely on to deliver independent advice, not someone looking to charge bloated annual fees to manage your money or a salesperson looking to unload his inventory on you. So if at any point in the process of dealing with an adviser you feel that something doesn’t ring true or that you’re not really sure you can trust the adviser, my advice would be to move on. There are plenty of advisers out there to choose from.
Who knows, maybe efforts now underway by the White House, Department of Labor and Securities and Exchange Commission to hold advisers to a more rigorous standard may make it easier for consumers to find advisers they can trust. I don’t consider that a given, but we’ll see. In the meantime, though, don’t let an alphabet-soup of credentials on a business card determine which adviser gets to handle something as crucial and irreplaceable as your retirement savings.
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