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Advisors Misclassify as Planners; Clients Don’t Know the Difference

A majority of advisors are marketing themselves as financial “planners,” even though they really don’t provide comprehensive planning services, according to a recent Cerulli Associates report. By adopting the nomenclature, they are hoping they can stay competitive amid the growing trend towards more holistic, one-stop-shops of financial services. According to the report, most of their clients don’t know the difference and aren’t sure of what they are missing.

“Until you have experience with something better, you just don’t have the expectations,” said Scott Smith, a Cerulli analyst. “[Clients] end up expecting what they got the first time, on an ongoing basis.”

According to Cerulli data, 59 percent of advisors perceive themselves as financial planners; but after Cerulli reviewed what they actually did, only about 30 percent actually merit the term by providing comprehensive planning, including savings plans, insurance, wills and trusts, college funds and tax advice. In reality, 56 percent of advisors should be considered investment planners, because they’re more focused on things like risk tolerance, asset allocation and investment management. The closest many of these investment advisors get to planning may be retirement savings and drawdown calculations.

“I think many investment managers do some basic financial planning, but really I’d call it investment planning,” said Chip Roame, managing partner with Tiburon Strategic Advisors. “They might not do an insurance evaluation and other types of planning that I would expect of a comprehensive financial planner, but I think in their minds they are more than just investment managers.”

Many of the larger firms with centralized services, such as Ameriprise Financial, the wirehouses, LPL Financial and Raymond James, are encouraging their advisors to expand their services to offer financial planning as part of their value proposition.

“You don’t want to create openings for competitors,” Smith said. “If people who call themselves financial planners but we call investment planners said to their clients, ‘You know, I’m mostly focused on your portfolio. We’ll touch on your overall life goals and financial plan, but it really doesn’t interest me all that much. I’m really more interested in just managing your money,’ they’d lose clients.”

“The label financial planner is broadly utilized and sounds more comprehensive and customer-friendly than investment manager,” Roame said. “There are few firms, Fisher Investments might be one, that proudly promote that they are only investment managers to the high-net-worth market.”

Creating a 100-page financial plan is hard to do and time consuming, and many advisors don’t have mastery of the material, Smith said.

“I think many of them default to the path of least resistance, if you will, and focus on the investment planning aspects of it because that’s something that’s not too hard to do, and is understood by both sides,” Smith said. “While many firms have backstops to them, they have centralized resources to help them, and certainly they’ll do that in high-net-worth cases, they don’t want to admit to anybody if they don’t have answers to something.”

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