These days financial advisors come in all shapes and sizes. Or you might say all shapes and sizes of people having anything to do with other peoples’ money like to call themselves financial advisors. I suspect however that financial advisors, by the average consumer’s definition, would be individuals who render personal financial advice for a fee.
Many unqualified (by industry standards) individuals are exploiting the opportunities only the internet offers to market their financial wares. Some have designed plans for themselves, their family and friends and feel confident they can do the same for the public at large – they know that in today’s economy, financial advice comes at a premium. While I admire anyone who efforts to reinvent himself, it’s risky business to trust armchair financial advisors with your money. You wouldn’t hire an unqualified plumber or mechanic, so why would you trust your financial present and future with someone who doesn’t know the ropes the way certified financial advisors do?
CFPs (generally speaking) strive to stay atop the changing economic climate as well as tax law, etc. Your financial advisor should not only be a qualified and certified professional but he or she should also be vetted by his or her experience and reputation. I.e., ask others you trust, perhaps your CPA, for a referral.
In spite of all the warnings, it doesn’t seem to take much to convince some consumers that there are financial advisors who would offer their “unbiased” expertise, at no charge, as long as it culminates in the purchase of a commissionable financial product. I.e., “I’ll tell how to save for your kids’ college, retire at age 55 and buy your dream vacation home as long as you spend $425 per month on a whole life insurance policy”. Sounds crazy, but it happens all the time.
And while I suspect there are fine professionals who make their living selling commissionable products, holding themselves out as financial advisors borders on misrepresentation. When we think advisors, whether we’re talking financial advisors, tax advisors, legal advisors and so on, we’re thinking objectivity is a given. But when so-called financial advisors get paid only upon their clients’ purchase of a commissionable product, objectivity is of course forfeited in the process.
