With the rise in “robo” financial services coupled with the large number of individuals claiming to be “financial advisors,” searching for the perfect financial advisor can quickly become overwhelming.
How do I know who I can trust?
Who will listen to my concerns and help me design a solid plan for my future?
While it may be hard to tell everything without a face to face meeting, you may be able to cross some advisors off your list by researching and understanding their professional credentials.
The Fiduciary Standard
An advisor’s credentials can illuminate their core values and reveal a great deal about their business practices. How? By indicating whether the financial advisor or advisory firm does business as a Fiduciary.
The Fiduciary Standard is the highest standard of financial care under the United States legal system that requires an advisor to “act solely in the client’s best interest when offering personalized financial advice.” Advisors operating under the fiduciary standard pledge to offer sound financial guidance to their clients that is free from any conflict of interest or underlying personal motive.
This may come as a surprise, but not every “financial advisor” you search will operate under this same code of conduct. In fact, many financial professionals are just salespeople whose earnings are tied to the number of financial products or insurance policies they can sell. When any individual’s compensation is linked to the type of service they are providing, there is simply no way to ensure whether the advice offered is in your best interest, or theirs. These types of financial advisors are not obligated to operate under the fiduciary standard.
Luckily, for clients or prospective clients, designations like the RIA and CFP® can help denote which financial advisors are committed to keeping your best interests protected.
Registered Investment Advisor (RIA)
A Registered Investment Advisor (RIA) is either an advisor or advisory firm that is registered with, and regulated by, the Securities and Exchange Commission (SEC) or state securities authority, to provide financial advice, make investment recommendations, and manage client assets without conflict of interest.
RIA’s and RIA operated practices are required to conduct business under the fiduciary standard and uphold the highest level of professional ethics in all their client relationships. In order to earn the RIA designation, an advisor must hold the Series 65 license, Uniform Investment Advisor Law Examination administered by the Financial Industry Regulatory Authority (FINRA).
The RIA will also have to be approved and maintain a “custodial” relationship. The custodian is the financial institution that will custody or hold the firm’s client assets and securities for an RIA. The custodian will generally hold client assets, process securities transactions, deduct advisory fees, and compile and deliver client account statements. Charles Schwab ranks #1 in this category with over $3.2 Trillion dollars in total client accounts.
Certified Financial Planner™ (CFP)
Not all financial planners are “certified,” and the Certified Financial Planner™ designation is not easy to come by. In order to earn this highly coveted credential, an advisor must satisfy the Four E’s :
- Education: The individual must complete a comprehensive course of study in financial planning at a college or university approved by the CFP® board.
- Examination: The individual must pass the rigorous CFP® Certification Exam which covers everything from the financial planning process, tax planning, retirement planning, estate planning, investment management, and insurance. The first-time pass rate on this examination is remarkably low due to the breadth and depth of the knowledge required to receive a passing score.
- Experience: The individual must be able to provide proof of 3+ years of experience in the financial planning and services industry.
- Ethics: As mandated by the board, CFP® professionals “are obliged to uphold the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence.” Additionally, they are “to put your best interests ahead of their own at all times and provide financial planning services as a ‘fiduciary’—acting in the best interest of their financial planning clients.” Individuals who violate these standards are subject to CFP® board sanctions.
There are several situations in life when you may seek professional financial planning advice but finding the “right fit” advisor might not always be the easiest task. Validating an advisor’s credentials can help you to eliminate the professional salespeople and connect with a Fiduciary whose core goal is to guide you to financial success.
At Aventine Financial we provide client-centered financial planning and investment advisory expertise. If you are in need of professional financial advice or are looking to connect with a true Fiduciary advisor, schedule a complimentary consultation to discover if Aventine Financial Group, LLC may be the right fit for you.
Frank J. Fiumecaldo, CFP
Founder & Partner