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• 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
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