You need to know there are real financial planners and there are bogus financial planners. The fake planners use the title to reduce sales resistance when they sell investment and insurance products. For example, a plan may recommend a substantial purchase of insurance products. You are more likely to buy if it is recommended by the plan and not by the financial planner. What is the difference? There is no difference when the plan represents the financial interests of the planner.
There are no industry regulations that limit who can call themselves financial planners. A brand new sales rep may adopt the title to facilitate the sales of financial products. There are no tests to make this claim more valid and there are no licenses for financial planners. If you are asking why, it is because Wall Street firms also benefit from this deceptive sales tactic. The firms make more money when they make it easy for their reps to sell investment products and services. And make no mistake. Wall Street has tremendous influence over the regulations that govern the industry.
Financial Planning Expertise
You may believe financial planners possess exceptional expertise that will help you achieve your financial goals. That may or may not be true. At the low end of the scale are reps masquerading as financial planners who use questionnaires to ask you a standardized series of questions about your assets, goals, concerns, risk tolerance, and requirements. Then the questionnaire is input into software that spits out your “custom” financial plan in a matter of seconds. The “financial planner” may spend an hour or two administering the questionnaire, a relative junior person inputs the data, and the “financial planner” presents the plan and completes the paperwork for the sale of investment and insurance products that are recommended by the plan.
Representatives need very little planning knowledge to execute this sales strategy. In fact, all they need is a little more knowledge than you possess to call themselves financial planners and experts in their field. They know you do not question the advice of experts, even if they provide no proof they are experts.
Be aware that financial representatives know most investors associate credentials with levels of expertise. They know you assume they did a lot of work acquiring credentials the same way future CPAs did a lot of work. It takes hundreds of hours of study to pass the CPA exams. It may take zero hours of study to obtain a fake planning certification. That is because advisors can buy fake credentials and use them to convince you they are experts in their fields. They get away with this deceptive sales practice because there is no easy way for investors to check the validity of credentials.