How do you select an investment professional?
Educating clients to select the right investment professional, and I put in the subheading, investment professionals are not all created equal?
So, How do I keep my clients, my potential clients, your potential clients, away from this guy, and towards people who are competent and ethical? And I say due diligence is critical. Who regulates the professional and how well? I think, to me, the best example of that is the way the securities industry regulates between the way… err… compared to the way the insurance industry regulates. Now I think there are a lot of problems with the security industry but i think if you compare the regulation, The insurance regulation is a lot lighter. So who is regulating this person that the investor is thinking about doing business with. The first thing I tell investors to do is pull whatever regulatory records you can: the ADVs, the CRDs. They’re free, they’re easy to get. It’s amazing the number of people who come to me… not so much now… but I’d say five or six years ago, who did business with somebody, and I pulled the CRD on them, the regulatory history on them, they had 10 customer complaints, they filed bankruptcy just before becoming a stockbroker, and they’ve had two DUIs and it’s just on-and-on and they’re like, “gosh, I never would have done business with this person if I’d known.” And it’s so simple to get.”
Investigate the quality of the designations. Charter financial analysis (CFA), as I understand it is a very legitimate designation, I’m sure you would agree… uh…
Likewise CFP I think CFP maybe 20 years ago was pretty easy to get. But I’ve heard it’s become… it’s a lot more heady. And I consider that to be a very legitimate designation. Certainly, it doesn’t mean that just because you’ve got a CFP or a CFA, you’re a guy that should be handling money, but it’s a huge plus in my mind, all other things being equal.
Here are some titles, not to disparage anybody that uses this title, but I just tell investors that these titles don’t mean anything. These are all titles… let me go back… all titles used by the securities industry broker-dealers. And I think again some people can’t tell the difference between a financial consultant and a CFA.
Here’s one that’s used a great deal in high net worth areas such as the one I am in.And probably some of the areas that you all work in: the term “retirement specialist”. There is a guy in my community, I think he’s gotten out of it now because he’s made so much money, but a guy in our community who highly promotes himself as a retirement specialist. And that’s nothing. I mean, it’s not even a… it’s just a completely made-up name. And again, a lot of investors can’t tell the difference between a “retirement specialist” and a CFA.
CSA is another one that’s used. There’s nothing wrong with getting your CSA, and as I understand it CSA is a legitimate designation but it really teaches you how to market to seniors. I think that some states have even brought regulatory actions against investment professionals for pretending that the CSA qualifies them to… to be knowledgeable about investments for seniors. And that’s not what the CSA is.