Most advisers overstating their expertise: Cerulli study

59% call themselves financial planners, but only 30% fit the bill in pattern of misrepresentation

Jan 19, 2012 @ 3:36 pm

By Jeff Benjamin

When pressed, it seems financial intermediaries will tend to overstate their qualifications and services, according to Cerulli Associates Inc.

“Most advisers don't want to say that they don't offer some kind of service, so they are more likely to overstate their capabilities,” said Scott Smith, a Cerulli analyst.

In studying the responses of more than 1,500 financial intermediaries, gathered over the past year as part Cerulli's annual quantitative-update report on the industry, Mr. Smith recognized a pattern of misrepresentation.

“We found that 59% of respondents were calling themselves full-scale financial planners, when it fact many of them were actually investment planners,” he said.

In Cerulli's parlance, which divides the overall financial intermediary universe into four broad categories, there are subtle yet distinct differences between an investment planner and a more comprehensive financial planner.

Even though 59% of respondents identified themselves as financial planners, Cerulli calculated that only 30% actually fit the definition of being better qualified and certified, working with clients to build comprehensive plans that include insurance and estate planning.

Investment planners, by comparison, focus on asset management, retirement and college savings plans but tend to offer more-modular-style plans.

According to Mr. Smith, only 22% of the 1,500 respondents identified themselves as investment planners. But when he went over the details of each respondent's business, Mr. Smith realized that 56% of respondents are actually investment planners.

Mr. Smith said much of the discrepancy could be attributed to that fact a lot of advisers view themselves as being more comprehensive than they actually are, simply because they believe they have the potential to be more comprehensive.

“Firms have encouraged their advisers to expand their advice relationships with clients; however, advisers tend to overstate the degree to which they are involved in the planning process,” he said. “The movement to extend advice services is likely being accelerated by turbulent markets, as advisers who base their value to investors on investment performance have suffered more than those with broad advice relationships.”

In the two remaining categories — money manager and wealth manager — Cerulli found that advisers have a more realistic perspective on the services they are providing.

Money managers, defined as mostly managing and building portfolios, were identified by Cerulli as representing 9% of the total universe, which was in line what survey respondents indicated.

It was similar in the wealth manager category, which includes advisers doing comprehensive planning for wealthier clients.

Cerulli identified 11% of respondents as wealth managers, which compares with 6% of survey respondents identifying themselves as such.

0
Comments

What do you think?

View comments

Most watched

Events

Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.

Events

Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

Tony Robbins loses role with RIA amid charges of sexual misconduct

String of allegations costs the self-help guru his gig as chief of investor psychology at Creative Planning.

SEC sets June 5 date for vote on Regulation Best Interest

Commission adds new item to agenda: Interpretation of broker guidance that qualifies as advice

House passes SECURE retirement bill with massive bipartisan support

The measure allows small employers to band together to offer plans and raises the RMD age. Another provision eases use of annuities in 401(k)s, which critics say goes too far

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

DOL sets date to propose new fiduciary rule

The regulation, expected in December, likely will be contoured to the SEC's new advice standards.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print