Econintersect: If your financial advisor professes to have an impressive record or breadth of experience you may want to exercise some due 
diligence. Scott Smith, an analyst with the Boston based investment industry research firm Cerulli Associates, has reported on the data collected in 2011 from more than 1,500 financial services personnel. He has found what he calls a pattern of misrepresentation. The Cerulli study divided financial intermediaries into four categories: investment planning, comprehensive financial planning, money management and wealth management. But what many of the persons studied did not fit their self-categorization.
The financial service professionals self-categorized as follows with the determination by Cerulli following each number in (parenthesis):
Investment planners: 22% (56%)
Financial planners: 59% (30%)
Money managers: 9% (9%)
Wealth managers: 6% (11%)
For reference, here are the brief job descriptions for each category:
Investment Planners: Those who focus on asset management, retirement and college savings plans but tend to offer more-modular-style plans.
Financial planners: Those qualified and certified to provide clients with comprehensive plans that include insurance and estate planning and are uniquely structured for each individual client.
Money Managers: Those who are focused mostly managing and building portfolios.
Wealth Managers: Money managers who additionally do comprehensive financial planning for very wealthy clients.
And investors can’t even depend on what is in the ADV form disclosures required by the SEC and by state regulators for smaller advisors. On November 21, 2011, Mark Schoeff Jr. described in Investment News actions underway by the SEC to crack down on “tarted-up” portrayals by advisors in ADV documents. From that report:
The SEC has begun reviewing registration documents to find financial advisers who have not accurately portrayed their education, assets under management, and other aspects of their firm, Robert Khuzami, director of the commission’s Division of Enforcement said last week.
“If they come face to face with inspectors early on…they’re going toknow that we’re watching, and they’re going to be unlikely to graduate to larger frauds,” he said at a hearing of the Senate Banking Subcommittee on Securities, Insurance and Investment.
Sources: Investment News (Cerulli study) and Investment News (print edition, Mark Schoeff Jr. article)
