Last updated, October 9, 2002. © Copyright 1997-2002 by Nigel Brian Taylor. All Rights Reserved. No part of this article may be quoted, copied or reproduced in any form, whether by photostat, microfilm, xerography, electronic or any other means, or incorporated into any other information retrieval system, electronic or mechanical, without the written permission of the copyright owner. Consumers are hereby granted permission to print one copy of this article for personal use only. All inquiries should be addressed to Nigel B. Taylor.

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Each year in the United States, thousands of consumers fall victim to rogue Stockbrokers, financial planning swindlers and boiler room telephone salesmen. Some lose a little, others lose their entire retirement savings with little or no help from the regulatory bodies when things do go wrong. (Remember, they regulate, they discipline, they fine, they bar from practice; They do not go out and get a check for you from the bad guys. You will need to arbitrate or sue in federal or State court to try and get your money back, throwing good money after bad sometimes.)

Ask yourself the following;

Have you ever noticed how people will diligently research, ask friends and demand referrals before visiting a new dentist, gynecologist, or a veterinarian for their beloved pet, but will often entrust their entire life savings to a good looking, smooth talking salesman with a polished appearance because he holds one or the other license issued by his/her State of residence and really seems to know what he is talking about?

Have you noticed that it's becoming really difficult to find an old fashioned "insurance agent" or "stockbroker" any more? Everybody seems to be a financial planner, financial advisor, financial counselor, investment advisor, investment consultant, "specialist" in this or that etc.

Have you also noticed, after talking to the "financial planner" at the local brokerage house, that you were left with the distinct impression he/she sounded suspiciously like the old fashioned "insurance agent or stockbroker" you used to talk to, because he was only interested in selling some insurance or an annuity to you?

One reason for this phenomenon is that there is currently no law which restricts the use of the term "financial planner" and, it is not yet considered a "legal term" subject to strict legal interpretation. Anybody, regardless of their training, licensing and qualifications can therefore call themselves "financial planner" and, when one considers the many recent scandals involving dishonest insurance agents and stockbrokers who are captive agents of large insurance companies and brokerage houses, it's no wonder many salespeople want to hide behind a title and profession that is rapidly gaining in popularity nationwide. Insurance agents who are not securities licensed haqve the easiest time of this because they don't talk about regulated securities, so it's doubtful if the requirement to register as an investment adviser can be enforced against them. Stockbrokers, thanks to the SEC, have numerous exemptions from registration, meaning he/she can duck full disclosure requirements demanded under SEC rules for investment advisers.

Before I start receiving nasty E mail from any of the aforementioned professionals, you as consumers should be aware that there are MANY extremely qualified individuals in the industry who do not hold a financial planning designation (Mind you, they also tend to be the professionals who are proud to call themselves insurance agents and stockbrokers and do NOT offer financial planning services!) There are also enough individuals currently holding one or the other financial planning designations who should really be flipping hamburgers. Further, though the incidence is thankfully not as high as in other parts of the financial services sector, a very small number of CPA's, CFP's, CFA's, CLU's, ChFC's and attorneys who practice financial planning have also been disciplined, fined or had their licenses revoked for various reasons. I recommend every consumer interview only CFP® Certificants. Why, because the CFP course curriculum meets an ascertainable standard of education, their 10 hour proctored examination meets an ascertainable standard in terms of competence, and their continuing education and code of ethics requirements ensure, to a minimum ascertainable standard, that the Certificant is current with his / her knowledge base.

Since the regulatory bodies are, for the most part, understaffed, underfunded and unable to properly supervise financial service professionals, it is time for you to make it YOUR job is to sort the wheat from the chaff before investing a dime of your hard earned assets with anybody.

Certified Financial Planner® (CFP®) Link to the CFP Board of Standards afterwards to learn more about this designation. The Rolls Royce of financial planning designations as far as I'm concerned. I'm a Certified Financial Planner® Certificant and proud to be one and yes, of course I'm biased, but I know how hard I worked to receive my designation. However, as with every single designation you will see listed here, it is essential that you make sure the person you talk to is still licensed to use the mark. Some licensed professionals get behind in their continuing education requirements and lose the right to utilize the CFP® designation. (or one of the other designations listed here) My opinion, if they don't want to keep up with the latest trends and techniques by continuing their education, they don't deserve your business. The CFP Board's home page also provides a message delivery system which will enable you to receive current licensing status on any Certified Financial Planner® licensee.

Chartered Financial Consultant (ChFC) This American College designation provides a comprhensive training that is heavily insurance oriented, but with other advanced courses in various financial planning areas. It is an excellent credential, but, I'm not a ChFC so let them blow their own trumpets!

Chartered Financial Analyst (CFA) Not a financial planning designation per se., however, CFA's are an extremely important group of financial service professionals with special skills. CFA's complete a three year part time course of education with a comprehensive examination once each year. Areas of study are, Tools and inputs for investment valuation and management, Asset Valuation, and Portfolio Management. CFA's are qualified consultants highly skilled in stock analysis, asset allocation and portfolio management. For pure asset allocation and portfolio management without comprehensive financial planning, I cannot think of a better designation, although, many CFA's are not available to the consumer, many actually manages huge portfolios at mutual fund companies etc.

Chartered Life Underwriter (CLU) A comprehensive Amercian College course of education designed to give insurance agents, field managers and insurance home office personnel in depth knowledge and greater skills to assist clients with their insurance needs. Some financial planning basics are covered but the course work is mostly geared to the insurance industry.

Registered Investment Advisor WARNING! This is not a "financial planning designation", it is a simple registration process undertaken by Federal and/or State regulatory bodies. It is the registration that is most misunderstood by consumers and I feel, is in desperate need of serious revision. Here is what you should know;

The training program for this registration (many complete the training course in a week!) is designed to ensure that any person holding themselves out as an investment advisor understand the basic regulations pertaining to the capital markets, and other SEC and FINRA regulations. IT DOES NOT TRAIN, QUALIFY OR TEST THE ADVISOR'S ABILITY TO OFFER INVESTMENT ADVICE, OR FINANCIAL PLANNING SERVICES. The only good thing about this registration is that it requires Investment Advisors (These words may NOT be initialized to RIA) to provide each client with a written disclosure statement in advance of any client agreement, or a copy of their SEC form ADV Part II which provides information about the adviser. There is NO provision that demands a minimum level of training or education. (Unfortunately, if you don't know this, you may fall victim and only find out afterwards when you file a complaint) The advisor can have his pet monkey throw darts at a stock page, PROVIDING he fully and truthfully discloses this method of asset allocation and research to you. (Interestingly enough, recent tests have shown the monkey outperforming some Wall Street Analysts, which proves how difficult your job of choosing the right planner really is!!) Note* Many Investment Advisors are highly qualified individuals who hold other financial planning designations and/ or licenses. THEREFORE, READ THE DISCLOSURE STATEMENT THEY GIVE YOU IN ITS ENTIRETY to ascertain WHY the individual is qualified to offer you investment advice. If the Investment Advisor registration is all he/she brings to the table, be very wary. Please also make sure that the Investment Advisor is individually registered, or at the very least, provides you with all the same information about himself, as he gives you from the company. All the major brokerage houses look incredibly strong with hundreds of billions under management. Since, under current law, advisors covered by the company's registration are only required to hand you the company's ADV form Part II together with information about the firm's principals, you absolutely need to gather much more information about their individual qualifications before you hand them your money. I'm always meeting people who went to big brokerage houses because of the size and reputation. My first question is, what did you know about the person who saty in front of you after you left his office. Of course, you received a lot of information about the size and assets of the firm and that information is always most impressive. BUT, the question you always need an answer to is; "is the guy sitting across the table just as impressive?!" Find out about the individual who will handle your personal affairs. In some cases you may find that he/she's only been in the business for a week! You usually have to have considerable assets before a large brokerage house will roll out the red carpet nowadays.

The reality of our current regulatory environment is; if you pay your fees, (In California around $150.00) and take a short exam, you too can become an investment advisor, with little or no idea of what you should be doing! Loopholes also exist in that for example, there is nothing to prevent insurance agents calling themselves financial planners without registration of any kind with the SEC providing they do not talk about or recommend investing in regulated securities. In California they are now supposed to register with the Dept. of Corporations but you are dreaming if you think they will bother. The CA Dept. of Corporations does not have the time or resources to check up on every life insurance agent. Also, Some attorneys, and a few CPA's who have not taken any training programs in financial planning give financial planning advice they really shouldn't, while claiming that this advice is solely "incidental" to their practice.(Another allowable exemption under the law) Sadly then, though the original thought by legislators to register and regulate advisors was an excellent one, it is my personal opinion and experience that;

a. Few consumers have any idea who should be registered as an Investment Advisor, and that registration does NOT equate with competence in financial planning.

b. Non-qualified individuals can easily register, and most consumers are fooled into believing that the registration is worth far more than it really is.

c. Unserious and unqualified professionals don't even bother to register anyway, and are therefore rarely discovered, scrutinized or disciplined. Further, with the meager funds available to them, the regulatory bodies will never be able to enforce strict compliance with the regulations.

d. My recent experiences with the SEC and FINRA, where no action was taken against a stockbroker, for example, who illegally traded on a deceased individual's accounts leads me to believe that, while those who lose millions may receive fair treatment at the hands of the regulatory authorities, (even if they never recover their money) the small investor who loses thousands may have to go it alone, throwing good money after bad in an effort to recover his assets in arbitration or the courts, a costly and time consuming affair.

The following is a list of some of the licenses you are most likely to encounter when seeking help with your investments. It is not a complete list. Further details may be obtained from the N.A.S.D. at their web site, www.nasdr.com

Series 6 License Investment Companies and Variable Contracts Representative. This licenses a person to offer mutual funds of all types and, if that person is licensed by the California Dept. of Insurance to sell life insurance, may allow them to offer variable life insurance for sale. Many agents take a 2 day crammer course followed by a computer based, proctored examination consisting of 100 multiple choice questions which must be answered within three hours with a 70% minimum passing score. The course covers only the very basics with regard to product and regulations. Some brokerage houses have better training courses for their representatives, many have no training classes at all. Continuing education requirements have recently been introduced for all registered representatives. The requirements cover regulations and handling of customer accounts etc. There is absolutely no training in financial planning anywhere in this course, nor is there any training given on the proper analysis of investments, and the matching of investments to investors. (It's my personal opinion that the FINRA relies on the broker dealers to properly train their own people.)

Series 7 License NYSE firms are required to offer a four month training program to all persons studying for the series 7 exam. This does not mean that trainees will be studying 8 hours a day 5 days a week. Most firms train their brokers on the product line available as well as some training in the day to day operation of the brokerage house, between working phones as order takers or other jobs for which no licensing is required. Prior to the examination, nearly all houses send their trainees to a one week crammer course pretty much guaranteed to enable them to pass the test first time. The one week crammer seeks to program the short term memory with enough information to get you through the examination. The examination is a 6 hour exam given in two 3 hour sessions consisting of 125+ multiple choice questions in each part. The emphasis is on understanding the various products that the salesperson will be licensed to sell together with rather complex regulation and compliance issues he/she will have to deal with at his/her broker dealer. This is not an easy examination, in fact it is really hard! it is definitely NOT however, a license to practice financial planning since, as with all licenses issued by the National Association of Securities Dealers (FINRA), absolutely no instruction is given in any type of financial, retirement, tax, insurance or estate planning. Neither is any instruction given with regard to the matching of suitable products to investors based upon their risk profile. (Complaints in Arbitration as to whether a product sold to a client was suitable are very common at the FINRA)

Series 24 License This license is the manager or supervisor license for N.A.S.D. registered firms. New York Stock Exchange (NYSE) firms do not recognize this license and demand the Series 8 branch manager examination. The series 8 examination is almost exactly the same in content as the 24, except that it also contains a number of questions regarding municipal bonds. In fact in many securities training schools, the Series 8 applicants sit in on the three day crammer for the Series 24 license and stay an extra day for the muni bonds information. The correct title for this license is General Securities Registered Principal. Many Principals also hold the position of Compliance officer in the office of supervisory jurisdiction. They are important people for the public since they supervise the operations and must approve the business of the stockbrokers and investment company reps. They are the first people to contact if you have a problem with any account at your brokerage house. Most OSJ's want to solve problems created by their stockbrokers and series 6 guys before they ever get to the FINRA complaint or arbitration stage.

Series 65 Uniform Investment Advisor training program. As previously stated, do not be fooled by the name. This license and the training program for this license is designed to ensure that any person holding themselves out as an investment advisor understand the basic regulations pertaining to the capital markets and other SEC and FINRA regulations. IT DOES NOT TRAIN OR TEST THE ADVISOR'S ABILITY OR QUALIFICATION TO OFFER INVESTMENT ADVICE.

TO SUMMARIZE THEN, DO YOURSELF A FAVOR!!: Ignore all the fancy political rhetoric about securities reform by politicians who kiss babies and make promises they can't keep once every four years to get reelected, and the eloquent statements of reassurance issued on a regular basis by the FINRA and SEC that they are cracking down on unscrupulous brokers etc..

No, of course not. Remember, in life only two things are guaranteed "Death and Taxes" Investing in securities always involves risk and you can lose some or all your money because, as many have found out the hard way in the time frame from March 200 to October 2002, makrets go DOWN as well as up. Assessing your tolerance for risk, building a properly divesified portfolio, monitoring that portfolio and making sure that all aspects of your personal finances have been addressed by a competent financial planner WILL give you a much better handle on things though.

Moreover, by demanding that any person who holds him or herself out as a financial planner be properly licensed, qualified and competent and, by running your own background check on them, before handing over your check to them, you will substantially reduce the likelihood of falling prey to unscrupulous so-called "financial planners" who are not really what they claim to be.

In order to help you make a decision about who you should employ as a financial planner, please download a copy of my worksheet on how to interview then check out any financial planner. It will provide you with all the basic questions you will need to ask, and give you names, addresses and contact numbers of the regulatory bodies, so that you can follow up this interview with a little research of your own.

If you download and use my worksheets for interviewing your financial planner and find them helpful, I'd like to ask YOU to extend a helping hand to someone else too by donating $5.00-10.00, whatever you can afford, to either; your favorite charity, a local children's home in your area, or send a check directly to a homeless shelter in your home town. If each of you do this, we can make the world just a little more pleasant for everyone, and I'm sure you'll get a good feeling too! Thanks for your time. The worksheet is in Adobe's Acrobat .pdf format. I've made it into a fill in form for ease of use. You simply open it up, conduct your interview, and print out the pages once you are done. (IMPORTANT: If you close the document, you will lose all the information and the document will be blank when you reopen it, so PRINT before you close!!!!!) Click here now for the worksheet.

If you are in need of competent, comprehensive financial or asset protection planning, please don't hesitate to visit my other web site, Taylor & Associates. There you will learn about the services I offer, my licenses, affiliations and other material facts about me. CLICK HERE to leave this web site and go to the web site of Taylor & Associates.

CFP®, CERTIFIED FINANCIAL PLANNER™ and the CFP® flame logo are federally registered services marks of the CFP board of Standards, Inc. CO.