January 18, 2005
In 1998 I rejoined a large wirehouse as a financial consultant because the firm was promoting financial planning. With 12 years of experience in financial services and having received the Certified Financial Planner CFP designation in 1997, I was eager to use my knowledge to help clients make the right financial choices.
My new employers financial planning product allowed me to be little more than a person who filled in a questionnaire during a client interview. Then this questionnaire was sent off to Denver to be processed. The completed plan along with recommendations came back for the financial consultant to present to the client. In the firms training program for new brokers, completing X number of these financial plans was a requirement to meet ones goals. There is no doubt that brokers were so pressured to meet the required goals that some clients may have been encouraged to buy the 250 plan even if they had little need for one.
I question whether transaction oriented big wirehouses really believe in the importance of financial planning. Perhaps they find it to be a convenient way to identify where other assets are held by its clients, and
identify opportunities to sell the client more investment products. Could the intent be to eventually bring the outside assets into a wirehouse account. Afterall, assets under management is one of the primary criteria used to compensate the brokers and financial planners.
The office I worked in had only one other CFP. He was a senior broker who was very busy handling his own large book of business. He was not expected to assist trainee brokers present the financial plan to the client.
Unfortunately, the young man who was running the financial planning program for the office had few years in the financial services business. However, he was expected to be the financial planning consultant for the other brokers.
Needless to say, I was greatly disappointed in how my employer was using financial planning and especially that they pressured new brokers who knew next to nothing about the topic of financial planning to do financial plans as a way to meet established performance goals.
Financial Planning may be the #1 financial concern retiring baby boomers have currently and will have for the next several years. There is a huge potential for providing financial planning advice. Wirehouses are well aware of this as well as the potential for retirement plan rollovers.
Financial advice and financial planning are defintely not one size fits all products that many of the large wirehouses think they are. Out of all the financial services offered, financial planning and financial planning advice needs to be extremely customized and personalized to meet the individual clients needs, goals and personality, and risk tolerance level. It may even mean discouraging the client from purchasing an investment that is unsuitable for him.
Do stockbrokers and financial consultants who have been brought up in a transaction based environment have the depth of knowledge or the ability to be qualified to offer
financial planning advice incidental to brokerage?
Will a client make the decision to purchase an investment product based on what he may wrongly assume to be the
expertise in financial planning of the stockbroker?
I urge the SEC to withdraw the proposed rule.