About financial advisors

12 years ago

My financial advisor told me that it is illegal for anyone who is not a registered financial advisor to help me with investing. Specifically, he said my lawyer cannot give me advice.
Just wondering if this is true. If I want to take advice from a son, is it illegal?
My husband died recently and I'm having to learn how to manage finances. He used to ask me what I would do if he died- I always said that I'd have to learn. I've found I don't like learning.

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Comments (14)

sushipup1
12 years ago
Your "adviser" is obviously just a salesman who will do anything to keep you captive and collect commissions. (Am I cynical? Yes. Am I realistic? Yup.)

There have been some good discussions over in the Household Finances Forum. Read back on a few threads.

Here is a link that might be useful: Household Finances
chisue
12 years ago
It's possible that you misunderstood. I'd like to think so...

Perhaps he said that others have no legal fiduciary responsibility (to protect your interests).
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Hi Taragirl, I know there are all sorts of financial advisors -- I'm looking for someone who can help us file our taxes (which will be more complicated this year), advise me on financial aspects of starting a business, and maybe even offer insight about buying land and construction loans and mortgages. Can I get this advice all rolled into one person? If so, what is his/her job title, and where do I find him/her? You're extremely unlikely to find any "Jack-Of-All-Professions" (and if you did find any to claim to be so, I would advise grabbing your wallet tight & backing away as quickly as possible...) Tax planning & filing = CPA (or tax attorney) Business books = small business bookkeeper (not typically a CPA's baileywick,) Buying land = high-end realtor, Construction loans & mortgages = high-end loan broker, Very very very few "asset & securities" professionals (people who sell & manage stocks, mutuals, etc. etc.) are knowledgeable at all about debt-versus-leverage and the best-practice structuring of them. Similarly, the "stock & investment" professionals generally ignore strategic aspects of real estate (if they don't actually advise you to sell yours & move your money into their stock accounts.) You *may* ultimately search and find a "Lead Advisor" who you find highly-connected and trustworthy to help be your "quarterback on the field" (with you being the team owner/manager) to know which plays to run, which specialists to hand off the ball to (and when,) and how to structure for defense (risk avoidance) as well as offense (investment growth.) Such an lead advisor "quarterback" could come from ANY position... the most critical aspects you'll want in this professional is; A) Deep expertise in their own field (as that will obviously serve YOU, but also will be critical in their respect from other professionals in ancillary fields,) B) Broad connections amongst highly varied fields, C) Balanced perspectives (able to serve clients from the CLIENT'S preferences (i.e. real estate rather than stocks, or insurance versus diversification, or the reverse, etc. etc.) *DO* be careful of placing too much weight on any certifications or distinctions... they have their place at the initial weeding of potential advisors... but they're pretty much only good for elimination purposes, and useless selection purposes. (I.E. from a large list of possibles, you may eliminate or handicap those who DO NOT have an advanced certification in their field... but it is unwise to make your final DECIDING SELECTION from the reduced list based on who has initials and plaques and certificates. In the end, all these really promise is that the recipient paid their fees and succeeded (at best) on a potentially slam-dunk quiz (if that.) Hope that helps! Dave Donhoff Strategic Equity & Mortgage Planner
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Hi again, jbspook, When I worked as a personal financial advisor, I suggested to everyone that they needed to learn how to handle current income wisely, and assets for the long haul. Quite a few said that they didn't have any assets. I replied that one of the major issues in life is to turn some of one's income into long-term assets. Furthermore, you never know when some (even distant) relative may die and leave you with a nice nest egg. Best to have learned something of how to handle it - beforehand. Which would you rather find: -how to achieve about the same as current lifestyle for $1000. lower cost, or -$1,000. increase in pay? On the day that you received your first Dollar Bill - you went into business for yourself. You likely had, at first, one employee - with a face on it, named "One Dollar". Sometimes you were lucky and received a bundle of new employees, all in one package - probably when you were a kid the first one was named "Five Dollars" - had a face on it, too. Most business owners feel that it's very important to learn how to operate their business. (If they don't, quite often they're not in business long). Learning how to manage money effectively is a long-term enterprise, but not too difficult. You don't get High School graduation after a year of schooling - and you don't teach a kid Grade 10 stuff when s/he's in Grade 2. Some folks are afraid of such learning - too complicated. They figure that money management is so complicated that the very idea intimidates them. I say that when Mom brings home a loaf of bread from the store (or she or Dad makes it her/himself) they put only a few slices on the table at a time. If Junior, tired and famished from running around, tries to stuff one whole slice into his mouth at once, it doesn't work. But, taken a bite and a slice at a time, it doesn't take too long, even for an old fart like me, living alone, to get through a whole loaf. Learning how money works is similar. We in Canada have a non-slick mag www.canadianmoneysaver.ca that runs no ads, also carries no pics except plain ones of the writers - who, by the way, give contact info at the end of 2 - 3 page articles and welcome response from readers. The 36 pg., 11 issues per year @ CAD$19.95 magazine's sole loyalty is to the subscribers. A lot of good ideas there - some of them relevant for Canadians only, but quite a few of general application. If you go there, I'm not sure how much of their information you can access, as a non-subscriber. Take a look and see. Don't know if such a magazine available in the U.S. They asked what the subscribers wanted - first was seminars with the writers of the articles. They've offered them in several places annually: 8 speakers, 45 min, each, $20. ($30. for two). Second was an opportunity for subscribers in an area to get together - now available in 35 - 40 places in Canada. I've attended, with about 18 others, the monthly meetings in this city for several years. Cost, as meeting room (boardroom of major local shopping mall) is free - is nil. Just a bit of gas - and a nearby person and I often ride together. Check some money management based magazines in your library. You may find a couple to which you'd like to subscribe - or just read them in the library. In our library system, you can't check out earlier issues of magazines from main branch - but you can from most of the branches. There are a number of books in the library dealing with investments that you may find helpful. I've suggested that people write down names, phone, email of everyone they know, build information about them all. If you had such, and had heard friends talk of financial affairs - could call them to ask what their experience may have been. By the way - such a list should save you hundreds, more likely thousands, in your lifetime (unless you have one foot in the grave). When you need advice, a service, etc. - ask your computer to search. It'll find knowledge, skills, etc. that your friends have that you'd forgotten. Can you live on the income of the one who's not to be the stay-at-home-look-after-the-kid(s) parent? Now's the time to start getting used to that. You'll find a lot of advice about how to live as you'd like - but more frugally - on the "Money Saving Tips" forum here. Quite a few of the posters offer the possibility of contacting them personally and I'm sure that most of them would welcome your inquiries (likely feel flattered that you asked). As Dave said - one type of financial planner is compensated by commissions on the stuf that s/he sells. Commissions are often at different rates on various types of instruments that s/he sells - which may colour their recommendations. They may receive ongoing "trailing" commissions annually on some products, as well. Most of them are allowed to offer only a limited number of financial products - so their knowledge is most comprehensive on that type of goods. Further - they may not choose to recommend stuff to you that they must send you elsewhere to buy. You should interview a number of prospective planners before choosing one. Inquire comprehensively as to the range of goods that your prospective plannner can handle. Are they the kind that most interest you? You should inquire fully about what training your prospective planner has taken, and what ongoing training is undertaken. What financial experience has your financial advisor had - in terms of advising others? What kind of experience has s/he had with regard to the growth of his/her personal portfolio? For example, one local writer says that he does not recommend financial goods to clients that he does not invest in himself. As he says, "He eats his own cooking". I'd be substantially interested in what general life experience my planner had had, as well. Lastly - you'll be carrying on a long-term relationship, relating to issues that are close to the core of your being. You need to choose an advisor with whom you feel at ease - who is compatible with you. Which is better - saving $1,000. in ongoing expenses at minimal impact on lifestyle - or $1,000. increase in employment income? The increased income of $1,000. will be a lot less than that - after you've paid income tax ... but $1,000. cash in hand not spent on goods is after-tax money. Enough for now. Again - good wishes in your search for financial management skills and such a highly skilled planner. joyful guy
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Comments (3)
Sorry for the length of this: It's half-amusing, half-offensive to be accused of shilling for anyone, since Im as self-taught as one can possibly be. Dreamgarden seems to have ignored all my many posts on other threads over the years. So let me restate my (lack of) credentials to reassure you that I have no vested interest in whether anyone ever uses a planner, advisor, broker, or banker. Havent earned a penny from anyone since 2006 when I retired and the last time I met my ex-boss for lunch, I bought HIM lunch, LOL. For the record, most of my friends and all of my family are like DH & me - we don't have enough liquid assets to be of interest to most financial planners. I have free access to CFPs thru DHs retirement portfolio, but I dont need them. Why? Because I enjoy finance and investing the same way I enjoy reading history, science, and mystery novels IOW, for the sheer fun of it. I read extensively Ive had a subscription to the on-line WSJournal since it was first offered, and read it every day plus I clip articles obsessively from a variety of websites. But I would NEVER assume that others want to spend their time the same way. Old Joyful, for instance, likes to invest in individual stocks. He and I had a recent discussion thread about this. I have no interest in anything but mutual funds. Individual stocks dont fit into our tax and financial situation. I have the healthiest respect for his knowledge and acumen, but the fact remains, he lives in Canada and I live in the US. My financial planning is going to be very different than his, just as my goals are different. I know from our own experience how hard it is to sit down and do estate planning. We dont have much of an estate compared to many, yet it took us decades to learn to identify the things we needed to do, so we could finally do the things we wanted to do. Ignorance is most certainly NOT bliss, as we, and so many others, have discovered! I am a firm believer that we should be teaching some of this stuff in school. The world has changed rapidly and drastically, and us middle-class Boomers are stuck trying to figure out a world so much more dangerous than our parents grew up with. If you read my post more carefully, you would see that I wrote that even cheapie (e.g., simple) plans can at least provide a starting point. I do my own planning, using the WSJournal calculators (a subset of which are available on Schwabs website, or so Ive been told). Ive tried others on the web, but wasnt satisfied as they cant be altered to fit our own unusual circumstances. If a simple planning software can help someone, all to the good. I havent found them very helpful, but that doesnt mean I call them all garbage. WSJs toolset comes closest to allowing me to set the appropriate parameters, without having to pay someone to do a plan for us. Why should I pay, when I have the knowledge to do it myself? Its not hard, it just takes some effort and decision-making. THIS is what a planner is for: to help you (if you cant do it yourself) quantify where you are right now, and where you want to be. This is related to investing, but investing is only a very modest part of it. Its the planning process thats critical, yet not well understood. YOU must do the decision-making. No software program or customized plan means anything if you cant accept the reality of what your current circumstances are, and are willing to work at reaching your goals. I recently talked a young family member out of seeing a planner because I was able to help her identify some long-term goals. She also needed some very basic help diversifying her portfolio. In a decade or so they should probably meet with a planner to ensure theyre on track for whatever their goals are at that time. But until then I told her there was no reason to consult with anyone unless a life-changing event occurs. Its more important for her to have all legal docs in order, at this stage of life. I learned a lot from my ex-boss "G", but I have never referred anyone to him. The people I know who have enough money for financial advisors, already have them. The one time I was emailed off-line to ask for an intro, I refused to do so as the specific circumstances of that person made it inappropriate, in my view. "G" is semi-retired, but stays in the business because he loves working with people. He does a lot of pro bono work and is both well known and respected here as he's been active in professional organizations for over 30 yrs now. He trains his office staff not so much on what to do, but what NOT to do. He is ethical and very, very precise about working for the good of his clients, which is why he has many families who are second- and third-generation clients. BTW, Madoffs clients should have known something was "funny" just in the fact he had them writing out checks to his name. Thats a definite no-no the assets should always be held by a third-party institution. The woman (also a CFP) who works in "Gs" office and produces the financial plans is a former elder care specialist who got into the financial side late in life. These customized plans cost a minimum of $4K and range up to $10K. They are certainly NOT for everyone, but when appropriate, can make a huge difference in someone's life. Most people dont need them, but the ones who do, need them a great deal! I worked with some of those clients, and their lives were definitely better for having gotten a good financial plan and then executed it properly. Actually, now that I think of it I did refer someone to my ex-boss. I told my DH that if I die before he does, he's to sell the house (I maintain it and the garden in addition to all the finances; he has no interest in such things), take the insurance proceeds, and bring the money to "G" to handle. You did not have a good advisor. Thats not your fault. Its hard to evaluate credentials when youre on that steep learning curve. But a good advisor isnt looking for the next hot thing for you a good advisor helps you identify your goals and gives you a roadmap on how to get from where you are to where you want to be. A good advisor says "no" to you almost as often as s/he says "yes." Its important, but difficult, to learn how to differentiate the good from the bad. The more educated we are in this area, the better we can tell who can help us and who cannot. Id liken financial planning/investing to painting a room. You can do it the sloppy easy way. You can do a "sorta-kinda" okay paintjob, shoving the furniture out the way and covering it. Or, you can do more extensive prep work: masking the moldings, laying dropcloths, priming and using two coats. You can use cheap paint and cheap brushes. You can use top quality paint and the best brushes or rollers. Its always your choice. Each method gets the job done, to varying levels of satisfaction, cost, time expended, and durability. Saying that **ALL** CFPs are worthless is like saying all professional painters are worthless. Some are, and some arent. Some people need one all the time/every time, and some only need one on occasion. It isnt for me OR for you to make that unilateral judgment. Using a pro for anything is always an individual decision that should never be taken lightly. Nor should that decision be disparaged, once made. Often a pro does do a better job than an amateur can. Sure, a talented amateur can sometimes better a pro but they need the talent, the interest, the skill, and the time. Not everyone has those in equal measure. To expect it of every person is unrealistic and unfair. I feel fortunate to have had the generous and thoughtful assistance of others in my life. Weve had some serious setbacks that could easily have turned out badly, but in the end everything worked out (so far at least!). If I can help others avoid some of the mistakes we've made, then I feel its worth the effort. We did okay (my ROI over 25 yrs is way better than average), but perhaps we could have done better if we hadnt been so ignorant for so long. We were at times the recipients of sheer dumb luck, but thats something one shouldnt be counting on to happen. Dreamgarden, may you have better luck in the future finding people or resources able to help you.
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Comments (13)
Many "financial planners" were, in the past, required to have a simple training course that was taken by people who were planning to sell mutual funds. Pretty rudimentary. In those days, people who had taken the course that stockbrokers take were much more knowledgeable, and many people calling themselves "financial planners" later took a six-component course leading to be a Chartered Financial Planner (later changed, and now the designation is "Certified Financial Planner"). In recent years regulations have been tightened a good deal. However, with the amount of money to which you refer, it's important to have an accountant advise, as they have thorough knowledge of the laws, and in cases such as yours, making any mis-steps can be costly. And accountants are required to keep up-to-date as new rules come out. As you know, the tax rules change frequently. Many accountants are quite conservative, and may suggest investing systems that persons willing to deal with some level of risk would find more safe that they could handle. In our area, if one invests in assets where the amount of the principal can't grow, one loses. All of the return that such principal develops is developed currently. The tax man wants to talk to each of us annually relative to our current income - and in Canada, some types of investment income is taxed at a much lower rate than others (mainly the kind that most folks use). If one earns about 4.5%, and is taxed at 33%, that takes the amount of after-tax money left in hand at 3%. And if the size of your principal can't grow - you need to add some current earnings to it annually in order to keep your purchasing power intact. If you'd given the bank $10,000.00 15 years ago in a 5-year guaranteed certificate, and renewed it twice ... ... when you invested it, the $10,000. would have bought a decent car. Not now, 15 years later. The government quotes figures for inflation, i.e. growth in consumer price index ... ... but most of us don't believe them, as our experience is that prices that we pay are rising faster then the recent 2 - 2.5% that they tell about. Here in Canada, for example, people have been telling us lately that the index doesn't include energy cost!!! Check out your various courses available carefully with a fully qualified person - in your Mom's state and yours. Not in the state of confusion, though, we hope. Moreover, if interest rates rise, as many expect them to do, especially in the U.S., carrying their huge government plus individual debt, plus government going deeper into debt each year (under a conservative regime, no less!) another problem arises for bond holders. If they hold them to maturity, they'll receive the full face amount, but if they want to sell them prior to maturity, the price offered by a potential purchaser will be much lower, for s/he can buy a current issue paying much higher rate of interest. My bias is in favour of high quality stocks for the major part of one's portfolio, even for an old fart like me, past 756 - drat this keyboard ... that figure was supposed to be 75: I ain't in the running against Methuselah! For reasons that I won't go into here, but will tell you if you email me. Good wishes for your Mom's choosing to deal with her assets in a way that won't back-fire later on either her or you her offspring. ole joyful
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marie_ndcal
12 years ago
I would look for a new advisor. Even Consumer's Guide has recomendations on this subject. You could check with your bank for advice, credit union also. My friend had to pay IRS a penalty of several thousand dollars because of advice her advisor gave her. Who does your taxes? Make sure they are a CPA. Good luck.
kayjones
12 years ago
I think you misunderstood what was said. I can tell you where to invest, but can't be held responsible if it's bad advice - a Certified financial advisor is under the auspices of a broker and carries a license to direct you where you could invest, but he's not responsible if you don't agree with the outcome.

The final decision of where to invest is totally up to you, which makes you responsible if you take the advice and it doesn't turn out to be good advice. You have to do your homework in order to make intelligent money investing decisions.

I have a financial advisor, and while he does all my investing for me, I chose to let him do so. If I were to lose all my investments due to his bad choices, I'm still responsible, not him, because I gave him the o.k. to use his best judgement as to what to invest my money in.

I have an excellent C.P.A. with whom my F.A. confers, as well as a super Attorney, so with the three of them handling all my financial investing, I feel confident.

Would I take the financial advice of a friend or neighbor? No, because they aren't educated, by law, to keep up with and understand the current best investments for me.
sleeperblues
12 years ago
I agree with Chisue. I think you misunderstood. There are two kinds of financial advisors. Fiduciary and non-fiduciary. An advisor who is a fiduciary legally has to advise you what, in their opinion, is a good investment for you. Whether or not they make money off of the investment.
Elmer J Fudd
12 years ago
I'd get another advisor. Get recommendations from friends or other advisors, as others have suggested.

If you're talking about a fair amount of money, choose a financial advisor who charges a management fee (usually 1% per year) instead of commissions on your transactions. That eliminate a conflict of interest.

Most lawyers I've dealt with aren't knowledgeable about personal investment choices or good with numbers. It's rare for most ordinary people that an investment choice would have legal consequences requiring the advice of a lawyer. There are things in your affairs that a lawyer is important for, but investments aren't on that list.

Don't have too much awe for an advisor having NASD or CFP or insurance or other licenses.The tests aren't hard to pass, based upon the know-nothings I've run into who have every title and license under the sun. Many frankly don't know their a$$es from a hole in the ground, they can make a living because the very little they know is more than the "zero" their customers know. There are some good ones. A few.

When you pick a CPA, pick one who doesn't have an affiliated investment advisory business.

What am I basing these comments on? Let's just say, these are things I know well......

Good luck.

PS - Anyone can give you advice, some things (insurance, securities) have some minimal regulation and require a license for the rep to handle transactions. It's not a guarantee of knowledge or integrity.

This post was edited by snidely on Wed, Jun 26, 13 at 17:52
gmom74
Original Author
12 years ago
Thank you all for your responses. My adviser said it is illegal for my lawyer to give me advice about investments and it would be illegal for himself to give me legal advice. He said both could get in trouble. It seems to me that it's up to me to take the advice of either one of them.
I have a good lawyer and a good CPA. It's just the financial bit that is giving me a problem.
patti43
12 years ago
Gmom, I think you need to look at your portfoilio from the fnancial advisor. If you have adult children, you may choose to have them look at it also. If your portfolio is growing, there would be no reason to change. Obviously your husband trusted him, so do a little "learning" before you rush into anything. I'm with you--I hate dealing with making those financial decisions, but sometimes you just have to. Good luck to you, sweetie.
Elmer J Fudd
12 years ago
It's illegal for someone who isn't a bar member (ie, a qualified lawyer) to practice law. Giving suggestions concerning legal matters is something personal advisors can't avoid, and that should be presented as "Here's what I think or heard, double check and pursue it with your lawyer". That's perfectly ok and commonly done.

Lawyers and CPAs give business advice and investment advice every day of the week. In some states, a lawyer in good standing can act as a real estate broker (because the lawyer's training is 100 X what a realtor has).

Replace the investment advisor, he's uninformed and sounds like he has a bit of paranoia.
jemdandy
12 years ago
As I undersand it, it is illegal for someone to market his services as a financial planer if he/she is not certified. Some investment brokers may also be certified Financial planners.

Trying to predict the financial market is iffy with much seat-of-the-pants guessing. That said, those who have been trained in the workings of finance and tempered with experience are in a position to make better guesses than the average person. Many, many things influence the day to day value of stocks and bonds including what happens in foriegn exchanges. Due to rapid computer response, a stock can change 40% in 3 seconds. Not long ago, this artifical automatic response was upsetting and recognized not to represent the true value of holding yet it affected the small investor just the same. It was such a problem that the SEC installed an automatic "circuit breaker" that temporarily halts trading of a security when hit by a wild swing in price,

For these reasons, it is good to have assistance and guidance when you first begin managing a portfolio. There is nothing wrong for an experienced, trusted family member to advise you so long as you realize it is just that: advice. Because of the potential of generating bad feelings when an investment goes sour, many self taught, expereinced family members will not advise their relatives. However, I know of a father-son combination that is working well. When the parent retired, he turned to his son to manage his IRA.

The problem you face is finding that honest, upright financial planner to work with during your learning period. In my opinion, you need to live through, and survive a couple of market downturns to get a feel of what's right for your portfolio.
Elmer J Fudd
12 years ago
"As I undersand it, it is illegal for someone to market his services as a financial planer if he/she is not certified. "

Many "financial advisors" have a registration, or even a license to sell securities, but may not have a "certification". As mentioned in an earlier post, these credentials (relative to other things) are not too difficult to get and, as such, are relatively meaningless. Scoundrels, well intentioned incompetents, and even those few who are reasonably capable come in all shapes, sizes and backgrounds.

Guessing market movements isn't iffy, it's impossible. No one and nothing, not even the super-sophisticated automated trader systems, does it right consistently. It's nothing for anyone to even feign an effort to do.
jmc01
12 years ago
"Many "financial advisors" have a registration, or even a license to sell securities, but may not have a "certification". As mentioned in an earlier post, these credentials (relative to other things) are not too difficult to get and, as such, are relatively meaningless. Scoundrels, well intentioned incompetents, and even those few who are reasonably capable come in all shapes, sizes and backgrounds."

Snidely, I've taken and passed a number of those tests that you refer to and will offer an opinion about their ease/difficulty if anyone is interested. Unless you've taken them as well, you may want to consider rephrasing some of your snide comments.

Gmom, Ask questions, take notes, ask to see copies of the specific regulations you have questions about. As you admit to being pretty new to this stuff, it's going to be challenging. Don't allow yourself to be rushed. Have a trusted person with you at meetings with the advisor if you think that will help you diges what's being said or to develop follow up questions.

As someone else mentioned, if your investments have done well, something was being done right.
rob333 (zone 7b)
12 years ago
You've answered your own worry:

"I have a good lawyer and a good CPA. It's just the financial bit that is giving me a problem"

Get a second opinion (or in this case, a new financial advisor). It sounds like you might not trust their judgement and that is not a good thing; it's your life they're ultimately playing with. Can't hurt just to talk to someone else without moving your investements?
gmom74
Original Author
12 years ago
Yes, I would like to change advisors. Hubby liked this one but I never did so I feel uncomfortable with him. My lawyer said he could give me some names of those he likes. I trust him so I may go that route. Thanks to you all.

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