From an inauspicious beginning in 1969 in the United States where Mr. Loren Dunton and 13 other dedicated financial professionals founded the Society for Financial Counseling Ethics, the profession has grown to more than 112,000 holders of the Certified Financial Planner trademark in 20 countries, with approximately 12 to 15 located in Bermuda.

The College for Financial Planning, which graduated its first class in 1973, is the oldest college in the United States focused exclusively on teaching the financial planning curriculum. A newer tradition for the global financial planning community sets aside a Financial Planning Week to promote the benefits of planning to the consumer and to highlight the best practices of the industry.

The Certified Financial Planner Board of Standards Inc. and the Financial Planning Standards Board which owns the global licensed trademarks CFP™ and the CFP flame logo scrupulously monitor international use of the CFP™ trademarked designation and related copyrighted materials, along with promoting and enforcing ethical fiduciary standards for its members.

What is a financial planner? Is there a difference between a planner and a financial advisor? There are so many names for financial salespeople out there; financial advisor, wealth manager, financial consultant, investment consultant, qualified planner, registered planner, personal financial planner, chartered retirement planner and so on. Some are legitimate, many more are nothing but generic marketing names, but it is all so incredibly confusing. How is anyone supposed to know what these descriptions really mean?

Actually, anyone can call herself/himself a financial planner. For instance, there are an estimated 300,000 "financial planners" in the United States, but only 60,000 have demonstrated the broad-based competency to provide financial planning services and adhere to a fiduciary standard of care that allows them to call themselves Certified Financial Planner (CFP) professionals. In other countries, such as Australia, planning qualifications are stringently regulated because any consumer facing life-changing financial events must receive counselling by a licensed financial planning professional. In Malaysia, no one can call themselves a financial planner, or provide investment advisory or financial planning services without a CFP™ practitioner designation.

There is a perception too that CFP certification, like all-too-many designations, is as easy to attain as a driver's license, or paying a fee and joining a planning membership organisation. the CFP mark cannot be earned within months of completing an undergraduate degree, but rather requires three years of documented experience that must be completed under the supervision of an experienced CFP™ professional before the candidate is awarded the CFP certification. An ethics set of standards must be met, along with a rigorous two-day national CFP certification examination that nearly half of all first-time takers fail. Ninety-six percent of certificants have at least a bachelor's degree while continuing education for the rest of the certificant's professional life is mandatory. There is no easy way to become a CFP professional, instead many in the finance industry seek this designation as a demonstrable way to assure their clients of their professionalism. Bottom line: it is not easy; it is attainable and it is worth it!

While not everyone can be a CFP, as a consumer you can at least verify that your consultant has some investment industry knowledge and experience, or is working on acquiring additional credentials, by using the list below.

The five most important criteria for working with an ethical professional.

1. Conflicts of interest: Does the person put your interests before his/her own interest? Does your consultant adhere to a code of ethics? Is the code enforced by any regulatory agency or standards board?

2. Qualifications: What is on the wall? Does the individual have credentials of any kind? Ask him/her to show you their professional credentials and discuss the educational, ethical, experience and exam (licensing) requirements to obtain these designations. At a bare minimum, the consultant should hold a securities license, although in Bermuda, this is not a stated requirement - The Act refers to a generic 'suitably qualified' statement. See further discussion on this in the next article.

3. Compensation: Ask how the consultant is compensated? Salary, Salary and bonus, percentage of assets brought in the door, straight commission on mutual funds sold, other combinations of the above. Conflicts of interest tend to arise in this area. You need to know what you are paying for.

4. Continuing education: your consultant should be knowledgeable in many areas. No one can know everything about the investment and financial planning world. Continuing education is absolutely necessary to help professionals keep up with the constant changes. You sure would not like your doctor to use 1970 surgical methods on you; why would you accept working with investment consultant who hasn't taken an investment course, read a recent investment publication, or other planning seminar in years.

5. Check and verify your consultant's information independently. Never take just their word that they are who they say they are - when you are contemplating giving them your money or following their advice. If you shop for an electronic item, you take the time to research the reputation of the manufacturer. If you consult a medical doctor or a dentist, you take the time to verify their reputational skill and experience. No one is above scrutiny. Yet, across the board, consumers seeking financial advice do not shop for quality, relying instead too much on trust and perception.

If your advisor, wealth manager, investment consultant (or whatever they are called) have reputable credentialed licenses, they will be there displayed on the wall (framed carefully), listed on the Internet and in their respective member organisations.

While the following will appear to readers as complete self-promotion of my profession, it is a given statistical fact that thousands of consumers are scammed every year, mostly by unlicensed financial salespeople. Yes, we do see even licensed professionals stepping off the ethical path, but at least, they are in the minority - most scammers are fraudsters from inception.

You have a right to ask for all relevant information that will make you feel that you are a valued client and that you can trust your consultant.

If he/she is forthcoming, objective, transparent and free of conflicts of interest with you, it can be the beginning of a good financial relationship. If after the interview process, you don't get that comfy feeling, walk away. You work way too hard for your money.

Next week: do you need a financial plan? How does planning work in Bermuda? Can you plan for yourself? Questions from Consumers that need to be asked.

Sources:

The History of Financial Planning by Kathleen M McBride

In Defense Of The CFP Mark: When it comes to ethical behavior and a commitment to putting clients' interests first and providing financial planning services with a fiduciary duty, CFP certificants lead the way by Kevin R Keller

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP is a Certified Financial Planner™ (US-67184) and a cross border financial planning specialist, She provides independent fee-only cross-border tax, estate, investment, and strategic planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or phone 296-3528.