Finance

• FINANCE
For a sense of how fungible the label “financial
adviser” has become, talk to Mike Chamberlain
of Chamberlain Financial Planning & Wealth
Management, which has an office in Sacramento.
“'Financial services industry' is a very broad
term,” he says, “and I don’t like being included in it.
It’s embarrassing — if I tell someone I’m a financial
adviser they immediately start to duck, thinking that
I’m trying to sell them something.”
Consider the alphabet soup of titles that adorn those
counseling people on their financial futures. They include Accredited
Financial Counselor (AFC), Accredited Investment
Fiduciary (AIF), Asset Protection Planner (APP) and Accredited
Asset Management Specialist (AAMS). Those are just the
A’s — the Financial Industry Regulatory Authority counts 167
such acronyms in all.
And a title doesn’t necessarily connote expertise. Some
designations have real teeth. Among other requirements, a
Certified Financial Planner (CFP) has to have advanced education
in finance (like a Ph.D. in business or economics) and do 30
hours of continuing education every two years. Others, like Behavioral
Financial adviser (BFA), just need to take two 2-month
courses from a particular for-profit college and pass an exam.
Soon all planners who give retirement investment advice
will have to adopt an additional designation, one that won’t
appear behind their name: fiduciary. That means they’ll be legally
bound to act in their clients’ best interest, not their own.
A U.S. Department of Labor rule set to kick in next April will
require retirement advisers to meet the fiduciary standard.
Chamberlain already operates as an accredited investment
fiduciary — his fees don’t waver depending on which
investment he recommends. That’s not true of many in the
industry, who earn commissions based on selling specific
products, some of them high-cost.
For fee-only advisers like Chamberlain, the effects will be
few. For other local financial planners who work on retirement
accounts, the change may well mean retooling how they make
money, and some may not survive. The rule applies only to retirement
accounts because only these accounts, such as 401(k)s and
IRAs, are under the DOL’s purview. The agency doesn’t regulate
regular investment accounts. Those are the province of the U.S.
Securities and Exchange Commission, which so far hasn’t required
all who give financial advice to operate as fiduciaries.
$17 BILLION IN HIDDEN FEES
Financial advisers get compensated in a range of ways, but
the two big ones are fee-only and commission. Typically,
those who earn fees charge a flat retainer that doesn’t change
with the advice they give, a fee that’s a percentage of their
client’s assets under management or an hourly rate. Those
72 comstocksmag.com | November 2016