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Making sense of the financial advice industry

April 14, 2014

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We’re midway through National Financial Literacy month and our look at resources and story ideas for addressing personal finance coping skills at various life stages.  This week, middle-age — the group that’s coping with myriad financial concerns from their kids’ (and perhaps their own) student loans to elder care to planning for their own old age, while juggling current expenses, job worries and real estate issues with one wary eye on the stock market, as well.

It’s a lot to digest and few people are financially literate enough to step back and objectively evaluate their own financial picture.  It may not make sense, for example, to bail out struggling adult children if it jeopardizes one’s own retirement — the younger set has more time to work and recover than their Baby Boomer parents, but many moms and dads are doing exactly that sort of bailing as we speak.  Same with retirement savings — you can borrow funds for education but you can’t make up lost time in building a nest egg, or borrow to fill it.  And we know now that many households that “lost it all” in the economic meltdown of 2008 really would’ve rebounded quite well if they hadn’t sold off investments in a panic.

But people respond emotionally to money-related situations, and don’t always pick the sensible path.  So one service you can do for middle-income, middle-aged readers is a primer on finding the most cost-effective financial advice for their situation.


Start with the basics — an info-box defining the credentials various advisors use, and what they mean. It’s easy for consultants to toss out Securities & Exchange Commission terms like “Series 7 license” and such that sound impressive — but the fact is many employers that require such a credential spend more time training their reps in sales tactics than in fiscal expertise.   And contrary to what some consumers assume, there is very little government oversight of people operating at the general “financial adviser” level.  As this  U.S. Government Accountability Office report points out, what regulation that does exist covers products, such as insurance, but not necessarily the education and quality of advice given by consultants.

CNN Money reported that there are 100 or more credentials used by financial advisers and some of those initials are no more than marketing tools doled out by trade groups.   Most personal finance writers will agree that the most reputable credentials, which require substantial education, exams and adherence to ethics codes, are the Certified Financial Planner and Chartered Financial Analyst.  I would include those in any list you create, and point out that many advisers also are lawyers, CPAs or have other credentials as well; it’s up to consumers to find someone with the right mix of skills, expertise and education.  This U.S. News & World Report piece, “How to find a financial adviser if you’re not rich,” may be the tack to take;  though it does seem to focus on commission-oriented investment advisors.


Sometimes, rather than ongoing money management, all a middle-income household needs is a one-time or two-time snapshot of where they are, some changes they can make (shift IRAs to lower-cost index funds, for example, and adjust asset allocation to match their age & goals) to maximize their returns.  The adviser should be able to provide advice about must-do steps like wills and health-care powers of attorney, a forecast of retirement income based on current savings rates and an evaluation of the household debt picture, as well.  Talk with some reputable advisers about what this sort of financial check-up should cost, and what services should be provided — as well as a checklist of questions/topics consumers should be prepared with.  The Garrett Planning Network is a professional associaton of fee-only financial advisors that aim to be accessible to people at many income ranges; use their search engines to find local members as experts for your story.


Want financial advice? 2) @haroldpollack gives it free…in index card form. pic.twitter.com/FxZURVw5z6

— Sendhil Mullainathan (@m_sendhil) September 5, 2013


Here’s a (PDF) booklet called “Know your financial adviser” from the Consumer Financial Protection Bureau you might use as a template for sidebars; it’s aimed at older consumers and makes the point that people in specialized situations, such as military retirees, need to seek out specialists in that area.  And as we have seen over the past year, financial and estate-planning advice for same-sex couples, whether they are legally married or not, is a complex issue and one that is becoming a growing niche for experts.

People who aren’t in a position to save might need a different sort of assistance; try to offer help to them, to, always keeping an eye out for helpers without a profit motive.  Credit unions sometimes sponsor low-cost budget counselors and volunteer tax assistance organizations might help families with tangled back-tax problems.  Also check with your state’s financial regulators, attorney general and other agencies about any ongoing enforcement actions or examples of prosecutions they can point to, which you can use as narrative examples for readers.


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