- the source for market opinions


March 12, 2018 | Most Financial ‘Advisors’ are Paid to Sell their Clients Capital Risk

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Happy Monday!

Another week, same old self-serving, conflicted foundations supporting the investment advice business.  See Most CFPs are brokers. Fiduciary advocates say that’s a problem: No,really? Who would have thought?!

As the CFP Board prepares to release a new set of standards of conduct for planners, investor advocates are calling for last-minute changes to strengthen the fiduciary responsibilities associated with the certification.

The board’s proposed standards don’t go far enough to address conflicts of interest and must also tackle advisors’ compensation arrangements, says Knut Rostad, president of the Institute for the Fiduciary Standard. Rostad said he would like to see the CFP Board’s fiduciary standard follow in the spirit of the Department of Labor’s rule and the fiduciary responsibilities that grew out of the Investment Advisers Act.

…”Here’s the rub: CFPs [CFA’s too!] mostly work in brokerage sales where these things are hard, or, frankly plain impossible,” Rostad said.

“Without guidance … brokers rely on industry training, culture and experience,” he added. “BDs live by suitability rules, and these are the home field to hidden conflicts.”

Rostad and his allies are also pressing the board to take a firmer stance on conflicts, urging elimination and mitigation over disclosure. They would also like to see language requiring transparency and clarity on conflicts and fees.

…Kahler finds the marketing campaign branding CFPs [CFA’s and other financial ‘advisors’] as trusted advisors particularly troubling. That promotional effort has been a bad-faith exercise representing all CFP holders as adherents to the highest code of ethics when the board’s own standards of conduct fall well short of that mark, he argues.

“At best I think our campaign has been misleading,” he says. “At worst I think it may border on being fraudulent.”

Bottom line: the financial sales side spends hundreds of millions a year on sponsorship, lobbying regulators and promotional materials that pull on the public’s heart strings with laudable ideas like planning for the future and looking after our loved ones.  All the while resisting and trampling on fiduciary standards that require their ‘advisers’ to put the best interests of trusting customers ahead of maximizing their own fees and commissions.
In doing so, they are committing fraud and causing great public harm.

We must demand that sales is separated from advising in finance. We need a return to Glass-Stegall-syle divisions. Yes we can. We have to.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

March 12th, 2018

Posted In: Juggling Dynamite

Post a Comment:

Your email address will not be published.

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.