Fake Financial Planners

There are two types of financial planners. There are legitimate financial planners who have knowledge and services that will help you develop a sophisticated plan that has a high probability of occurring. Then there is the other type, sales representatives who call themselves financial planners because it helps them sell investment and insurance products. They don’t have specialized planning knowledge and their services have one purpose – sell you the products that make them the most money.

Fake financial planners are very dangerous. What if you bought a plan from one of them and based your financial decisions on their plan recommendations. For example, the plan tells you how much to save, how much you can afford to spend, and how to protect yourself from the risks of outliving your assets. Plus, several of their plan assumptions impact when you retire, your standard of living during retirement, and your financial security late in life when you need it the most.

These plans are very long-term because you may have several working years left before you retire. Then your assets have to produce increasing income for 20 to 30 years during your retirement. Unfortunately, you don’t find out you have a defective plan until years into the future when you can’t retire when you want to and live the way you want to. This realization is devastating because it’s too late and your only choices are to defer retirement or work part-time.

You might be asking yourself, “Aren’t there regulations that prevent sales reps from calling themselves financial planners when they don’t have financial planning knowledge”? There are two answers you should be aware of. First, there are no regulations. Reps can use any title they want to. Second, unscrupulous reps use verbal sales pitches so there is no written record of what they said to you. Verbal information is very easy to deny later when it’s your word against the rep’s word.

So how do you tell the real financial planners from the fake financial planners? Here are seven rules you should follow that will help you protect your financial future from predatory sales reps who masquerade as financial planners to maximize their product sales.

• All of the information that impacts your selection decision must be in writing.
• Only select a financial planner who provides documentation that he or she is a CFP® (Certified Financial Planner) or CPA/PFS (Personal Financial Specialist).
• The professional must have at least five years of planning experience.
• The financial planner must be an RIA (Registered Investment Advisor) or Investment Advisor Representative (IAR). RIAs and IARs are held to higher ethical standards.
• The financial planner must be an acknowledged fiduciary. Fiduciaries are required to put your financial interests ahead of their own.
• The professional must provide planning services for fees and not commissions.
• Don’t select financial planners based on what they say. Require them to prove what they are saying is true. When you allow them to say whatever they want, they control the information that you use to select the right financial planner for you.