On another of its web pages the firm states: "Our mission is to become your trusted advisor - one of the first people you call when things change in your life. Someone you would send your mother to for advice. We do this by ... always putting your interests first." [Emphasis added.]
The firm also states that it is "a financial planning and investment management firm. Our CERTIFIED FINANCIAL PLANNER® practitioners utilize a comprehensive approach providing recommendations in areas from retirement planning for individuals and businesses to managing investment portfolios, and insurance and estate planning." [Emphasis added.] Hmmm ... I thought the CFP Board takes the position that if a CFP certificant just performs services in one area, such as "estate planning" (i.e., insurance), then the certificant not doing "financial planning" (in the CFP Board's definition of same). (Note: I don't agree with the CFP Board's position, in this regard; but that's another debate for another time.) Yet, the firm suggests that its advisors utilize a comprehensive approach. Does that mean that, given the firm's holding out of this comprehensive approach, that the accepts the CFP Board's fiduciary obligations attendant to same, at all times? Or is this representation, that comprehensive advice is provided, just a bait and switch?
The fact that the firm also SELLS securities and SELLS insurance products appears to be de-emphasized on its web site.
The firm's ADV Part 2A states in part: "Advisors working with [NAME OF FIRM] are engaged in parts of the financial planning business other than giving investment advice. They may also sell securities and insurance for sales commissions, or may provide college planning services, financial planning services, and retirement plan services for compensation. Those activities take up a substantial part of their workday. Although [FIRM NAME’S] employees may receive compensation for these other services, clients are under no obligation to act upon any insurance or planning recommendations made or to make any transactions based on these recommendations." [Emphasis added.]
The firm also states in its Form ADV, Part 2A: "We may in certain instances recommend investment products that pay us or our representatives a commission instead of a fee, but do not do so in accounts that we manage on a discretionary basis. The receipt of commissions from these transactions of course may create an incentive to recommend that you purchase certain securities based on our interests rather than yours, which is a potential conflict of interest. However, all such commissions or sales charges are disclosed to you in advance of any investment, and you would be under no obligation to purchase such products. Moreover, we believe that our recommendations are in the best interests of our clients and are consistent with our clients’ needs."
- How can you truly keep the best interests of the client paramount, yet be free to recommend products which pay you (the firm) commission-based compensation?
- Is the compensation reasonable (judged under fiduciary standards of reasonableness, not under FINRA's rules)?
- Do you think clients really understand the disclosures you provide?
- Do you think that clients even read the disclosures?
- Do you think your clients are aware of the need to protect themselves, under the doctrine of caveat emptor, when you switch hats from a fiduciary relationship to an arms-length relationship?
- Are you not aware of the compelling body of academic research that when trust is placed in the adviser, disclosures don't work - due to behavioral biases which consumers possess?
- Are you also not aware that the economic incentives presented by, and the allure of, higher-fee products nearly always leads one to, consciously or unconsciously, begin to make decisions that are not in a client's best interests?