CSA's and Sharks make front page of NYT

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AllREIT's picture
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http://www.nytimes.com/2007/07/08/business/08advisor.html

Quote:
For his part, Mr. DelMonico, while he awaits the outcome of his
case, is still approved to sell annuities by American Equity and more
than two dozen other insurers, according to state records.
“I just got my insurance license renewed in Rhode Island,” Mr.
DelMonico said in an interview. “Business is still pretty good.”

troll's picture
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On the other hand CFP was mentioned in the article as much more credible.

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" The Society of Certified Senior Advisers, which gave Mr. DelMonico his credentials, is a for-profit company that has trained 24,000 enrollees since it was started in 1997. Its founder, Edwin J. Pittock, is a former mutual fund executive who was twice suspended by the Securities and Exchange Commission. "
Now that is some prize winning investigative journalism. This is really heady stuff - maybe I'll start the Society of Window Washers so certain seniors don't get fleeced because they didn't bother to ( have a family member or friend help them ) check out the personal credentials of the person who came into their home to wash the windows next to the jewel box.
Reminds me of the orignal version of the  movie " Shaft ", or maybe " Super Fly ", where a man runs up to an Innocent and says, " Hey man, hold this bag " and keeps running.

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pratoman wrote:On the other hand CFP was mentioned in the article as much more credible.

Well yes, and thanks to the new "fiduciary" responsibility, CFP's will
gradually shed the problems associated with Insurance Agents/RR's who
used the CFP to gain unwarranted credibility.

If anything they understated how much work it takes to become a
CFA/CFP. I wish the article had pressed a little harder on how bad
annuities are.

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My favorite parts of this "expose":
"But the vast majority of annuity sales do not offer immediate payouts. Instead, they require buyers to wait as long as 10 years to begin receiving benefits. Such contracts, known as deferred annuities, made up 97 percent of all annuity sales last year."  Now, all the annuities that I offer have "free withdrawal" amounts that are not subject to surrender charges.  But, if the contract owner goes above that amount, then they get hit with surrender charges.
“All these insurance companies had trusted him, so I knew that I could trust him, too,” she said. “And when he became a certified senior adviser, I felt good, because he had gone to school for a long time.”  When someone has to say that "all these insurance companies trust me" and "I had gone to school for a long time" to make a sale, that shows that he hasn't added ANY VALUE and is trying to impose trust where trust shouldn't be given or awarded.  Trust is given while giving good advice and helping the client be comfortable with the recommendations.  If you have to rely on "school experience" and "insurance companies trust me" to get the signature, that's not a good sign.
“The insurers are happy to turn a blind eye to what salesmen are doing, as long as they make a sale,” said Minnesota’s attorney general, Lori Swanson, who is suing several companies, including Allianz, contending their products are inappropriate."  It's the AGENT'S job to judge suitability of products, not the company who makes them.  It's like suing a company who makes SUVs because a car salesman sold an SUV to someone who really needed a compact car.  It's not the MANUFACTURER'S fault.  It's the fault of the person who SOLD it.“I just got my insurance license renewed in Rhode Island,” Mr. DelMonico said in an interview. “Business is still pretty good.”  States "talk" to each other, stupid.  If this guy is securities licensed, I bet we'll see him in an email from rrbdlaw.com showing that he's been banned from the industry with a hefty fine.

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skippy wrote:I just got my insurance license renewed in Rhode
Island,� Mr. DelMonico said in an interview. �Business is still pretty
good.�  States "talk" to each other,
stupid.  If this guy is securities licensed, I bet we'll see him
in an email from rrbdlaw.com showing that he's been banned from the
industry with a hefty fine.

Skip, alot of these people are insurance only. It's a profitable business, especially with high paying EIA's from AZ etc.

Do a seminar for $2500, and if you can ensnare even $40,000 @ 8% GDC in
premium the thing has paid for itself. Alot of people from that
generation grew up in the new deal/post new deal era, when the man in
the nice suit was here to help you.

Anyways, AEL's investor presentation are my favorite tool in making the case against Annuities.

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I wish the article had pressed a little harder on how bad annuities are.
I have been under the impression that in certain cases, annutities are striving to deliver a slight return premium to CDs.
Just saying how bad annuities are seems to perpetuate consumer ignorance, which is the real problem here. You have regulation, and you have choices. Everything else is BS and sentimental.
Much of what the media does, even in this article, is sentimental - since the treatment of the broader issue is really incomplete.
At least we can be hard nosed and realistic.
Thanks for bringing up the article, Allreit.

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" I wish the article had pressed a little harder on how bad annuities are. "
edit.

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AllREIT wrote: skippy wrote:I just got my insurance license renewed in Rhode Island,� Mr. DelMonico said in an interview. �Business is still pretty good.�  States "talk" to each other, stupid.  If this guy is securities licensed, I bet we'll see him in an email from rrbdlaw.com showing that he's been banned from the industry with a hefty fine.Skip, alot of these people are insurance only. It's a profitable business, especially with high paying EIA's from AZ etc.Do a seminar for $2500, and if you can ensnare even $40,000 @ 8% GDC in premium the thing has paid for itself. Alot of people from that generation grew up in the new deal/post new deal era, when the man in the nice suit was here to help you. Anyways, AEL's investor presentation are my favorite tool in making the case against Annuities.
AllReit, do you have a way to show this presentation?  Would I be able to look this up?  I am interested in seeing this and coming up with my own conclusions.  Thanks.

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AllREIT wrote: pratoman wrote:On the other hand CFP was mentioned in the article as much more credible.Well yes, and thanks to the new "fiduciary" responsibility, CFP's will gradually shed the problems associated with Insurance Agents/RR's who used the CFP to gain unwarranted credibility. If anything they understated how much work it takes to become a CFA/CFP. I wish the article had pressed a little harder on how bad annuities are.
So, the RR's who get the CFP work hard to get the designation, but it doesn't add any credibility?  Am I safe to assume that you feel this hard test/course can only be truly benefitted from if you are an RIA? 

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GolFA wrote:I wish the article had pressed a little harder on how bad annuities are.
I have been under the impression that in certain cases, annutities are striving to deliver a slight return premium to CDs.

The purpose of fixed/EI annuities is to pay out less than what the insurance company can make on its general account.

That general account is basicly a big puddle of AAA/AA rated
securities, so fixed/EI annuities are going to pay between 150-300bp
less than that.

Look at the crediting rate on the annuity term sheet, and you will see that it is below market.

I can think of only one annuity company that pays an assured market rate, on deferred annuities. http://www.brkdirect.com/
BTW, This company also offers insurance against Hole-in-ones,

http://www2.nationalindemnity.com/holein1/index.htm

Quote:Just saying how bad annuities are seems to perpetuate
consumer ignorance, which is the real problem here. You have
regulation, and you have choices. Everything else is BS and sentimental.

IMHO, Telling people off the street that "Annuities are a giant ripoff" covers about 85% of what people need to know about annuities.

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deekay wrote:AllReit, do you have a way to show this
presentation?  Would I be able to look this up?  I am
interested in seeing this and coming up with my own conclusions. 
Thanks.

http://media.corporate-ir.net/media_files/irol/14/147784/Inv estor%20Presentation%2003.31.07%20REVISED.pdf

See the part about "significant surrender protection" and "Spread Management"

Note the target spread of 250bp, *and* look at the past few earnings releases to see how well AEL has been beating targets.

However, before you rush off to buy AEL, be aware of the latent risk of
lawsuits etc. Look at the chart of  Policy holder age
distribution, and working from the average policy surrender
period/charge, see if you can visualise the problem.

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AllREIT wrote: pratoman wrote:On the other hand CFP was mentioned in the article as much more credible.Well yes, and thanks to the new "fiduciary" responsibility, CFP's will gradually shed the problems associated with Insurance Agents/RR's who used the CFP to gain unwarranted credibility. If anything they understated how much work it takes to become a CFA/CFP. I wish the article had pressed a little harder on how bad annuities are.
Please shed some light on how, if an insurance agent, or RR, actually passes the exam, his credibility should be considered "unwarranted". Did a wirehouse RR study less, or learn less to pass the exam than any other CFP? Whether the firm he is with allows him to act as a fiduciary or not, does he have less knowledge? And is it warranted that one would assume just because he or she is associated with a wirehouse or insurance agency, that the RR/insurance agent is NOT putting the clients interest first? What about the RR's who are Not annuity sharks - and who passed the CFP - why is their credibility less warranted than any other CFP?
I really respect all the indies on the board, not only because you guys have a lot to contribute, but because you had the balls to take the risk. But jeez, sometimes you guys can really get on your high freaking horses!! There really are RR's out there who take great care of their clients. really! And the ones who have earned the CFP designation by taking the same 2 day exam as the rest of the CFP's have just as much right to use the designation as a f**kin indie, RIA or any other person who dispenses advice.

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A lot of Indies are RRs.
Allreit likes to use his RIA status for marketing. I charge 1% to clients at b/d wrap. We're both CFPs. That makes who more ethical.

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AllREIT wrote: deekay wrote:
AllReit, do you have a way to show this presentation?  Would I be able to look this up?  I am interested in seeing this and coming up with my own conclusions.  Thanks.
http://media.corporate-ir.net/media_files/irol/14/147784/Inv estor%20Presentation%2003.31.07%20REVISED.pdf See the part about "significant surrender protection" and "Spread Management"Note the target spread of 250bp, *and* look at the past few earnings releases to see how well AEL has been beating targets. However, before you rush off to buy AEL, be aware of the latent risk of lawsuits etc. Look at the chart of  Policy holder age distribution, and working from the average policy surrender period/charge, see if you can visualise the problem.
Thanks for posting this AllReit.
To me, this presentation says that AEL likes making money.  As do all financial institutions.  And by nature, financial institutions want to hold onto deposits as long as possible.  AEL has a mechanism that allows them to hold onto it longer.  IMO it is not good or bad, it just is.  Last I checked, we're in a free-market capitalistic society.  Let the market decide whether AEL and other companies can survive.
Frankly, in some cases certain clients should have a bit of illiquidity.  Why?  We're a nation of spenders and sometimes people need to be forced to save.  Give a certain client full access and what will happen?  They'll access it, thus putting themselves in a deeper hole.  That said, there are people who are shoved into EIAs without getting the full scoop.  And that is the real crime, not the product itself. 

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Why?  We're a nation of spenders and sometimes people need to be forced to save.  Give a certain client full access and what will happen?  They'll access it, thus putting themselves in a deeper hole.  That said, there are people who are shoved into EIAs without getting the full scoop.  And that is the real crime, not the product itself. 
Well said.
This this is where my thinking is going, after having wrestled much with the question of b/d vs. RIA, wirehouse vs. independent, proprietary vs. non- prop: all valid areas to school your thinking, but the bigger question of serving a lot of AUM well and achieving true financial independence for myself, a sort of updated " Think and Grow Rich " as an advisor in the industry, achieving true success requires an enthusiastic focus on the principals you raise here, not so mch annuities or not, as being open minded about offering clients the best choice but also not being fearful about those who would cow us into being worried about which b/d, which RIA, which product...

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pratoman wrote:Please shed some light on how, if an insurance agent,
or RR, actually passes the exam, his credibility should be considered
"unwarranted".
Because the knowledge gained and adviced dispensed will "solely incidental" to the core business of the sale of securities. It is minor dust.

So unimportant as to be unworthy of regulation per the SEC/NASD.

Quote:Did a wirehouse RR study less, or learn less to pass the exam
than any other CFP? Whether the firm he is with allows him to act as a
fiduciary or not, does he have less knowledge? And is it warranted that
one would assume just because he or she is associated with a wirehouse
or insurance agency, that the RR/insurance agent is NOT putting the
clients interest first?

Well given that RR's operate in a framework where they explicitly do not put the clients best interests first....

I'm not saying that any single person is unwarranted, but as a class
it is an issue. An unavoidable issue. Thus the CFP boards recent
revision (and tightening up) of the code of ethics:

Quote:The revised standards require a CFP®
professional to “at all times place the interest of the client ahead of
his or her own.” The new language replaces the lower standard of
“reasonable and prudent professional judgment” contained in CFP Board’s
current Code of Ethics and Professional Responsibility.

The revised standards also require CFP®
professionals who provide financial planning services do so with the
duty of care of a “fiduciary,” a term partly defined as acting “in the
best interest of the client.” The heightened duty of care
significantly strengthens the current requirement that financial
planning services be performed “in the interest of the client."

That's the difference between the best, and the suitable.

http://www.cfp.net/media/release.asp?id=161

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deekay wrote:Thanks for posting this AllReit.
To me, this presentation says that AEL likes making money.  As
do all financial institutions.  And by nature, financial
institutions want to hold onto deposits as long as
possible.  AEL has a mechanism that allows them to hold
onto it longer.  IMO it is not good or bad, it just is.  Last
I checked, we're in a free-market capitalistic society.  Let the
market decide whether AEL and other companies can survive.
Frankly, in some cases certain clients should have a bit of
illiquidity.  Why?  We're a nation of spenders and sometimes
people need to be forced to save.  Give a certain client full
access and what will happen?  They'll access it, thus putting
themselves in a deeper hole.  That said, there are people who are
shoved into EIAs without getting the full scoop.  And that is the
real crime, not the product itself. 

You are engaging in rationalisation. Attempting to put a socially acceptable explanation upon actions not otherwise acceptable.

Seniors, do not need illiquidity/heavy surrender charges and in general
cannot understand complex financial products like EIAs etc. You know
that, I know that, and it is not a matter for debate.

AEL supplies the tools and incentives for various unethical sales
people to cause alot of harm. Which is why they are staring down the
barrel of a gun as over 25% of their policy holders are 75+, with an
average surrender term of 13 years and 14% S/C.

http://www.ag.state.mn.us/Consumer/PressRelease/0706AnnuityI nsurerLawsuit.asp

Quote:

Swanson said the company failed to follow the state
suitability statute, in existence since the 1980’s, which requires an
insurance company to ensure that an annuity is suitable for the
particular customer. “From 2000 through 2006, American Equity sold
approximately $46 million in long term annuities to more than 1,200
Minnesotans who were over 75 years of age at the time of purchase,
essentially locking up their savings for up to ten to sixteen years,”
said Swanson. “The maturity date of the annuities in some cases was
longer than the life expectancy of the senior citizen,” Swanson said.
Swanson also described the 25 percent surrender penalty in the early
years of certain annuities as particularly outrageous.

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AllREIT wrote: deekay wrote:
Thanks for posting this AllReit.
To me, this presentation says that AEL likes making money.  As do all financial institutions.  And by nature, financial institutions want to hold onto deposits as long as possible.  AEL has a mechanism that allows them to hold onto it longer.  IMO it is not good or bad, it just is.  Last I checked, we're in a free-market capitalistic society.  Let the market decide whether AEL and other companies can survive.
Frankly, in some cases certain clients should have a bit of illiquidity.  Why?  We're a nation of spenders and sometimes people need to be forced to save.  Give a certain client full access and what will happen?  They'll access it, thus putting themselves in a deeper hole.  That said, there are people who are shoved into EIAs without getting the full scoop.  And that is the real crime, not the product itself.  You are engaging in rationalisation. Attempting to put a socially acceptable explanation upon actions not otherwise acceptable. Seniors, do not need illiquidity/heavy surrender charges and in general cannot understand complex financial products like EIAs etc. You know that, I know that, and it is not a matter for debate. AEL supplies the tools and incentives for various unethical sales people to cause alot of harm. Which is why they are staring down the barrel of a gun as over 25% of their policy holders are 75+, with an average surrender term of 13 years and 14% S/C. http://www.ag.state.mn.us/Consumer/PressRelease/0706AnnuityI nsurerLawsuit.aspQuote:
Swanson said the company failed to follow the state suitability statute, in existence since the 1980’s, which requires an insurance company to ensure that an annuity is suitable for the particular customer. “From 2000 through 2006, American Equity sold approximately $46 million in long term annuities to more than 1,200 Minnesotans who were over 75 years of age at the time of purchase, essentially locking up their savings for up to ten to sixteen years,” said Swanson. “The maturity date of the annuities in some cases was longer than the life expectancy of the senior citizen,” Swanson said. Swanson also described the 25 percent surrender penalty in the early years of certain annuities as particularly outrageous.

AllReit - I think you misinterpreted my comment about levels of liquidity.  I am certainly NOT advocating the use of a 25 year surrender EIA for someone's total liquid assets.  Especially for someone who is not expected to live 25 years.  
But I do believe that for certain investors, a lack of liquidity is a good thing.  I (and I'm sure you) have encountered folks who cannot/will not stop spending no matter what you tell them.  Should I not try to help them because they are not the ideal client?  Quite the opposite, I will do whatever I can to keep them on track for their goals.  Now, before I continue, I must point out that I have NEVER placed an EIA contract.  I don't think I ever will.  But for a client who cannot/will not stop spending, all options should be placed in front of the client without bias.  In my opinion, THAT is in the best interest of the client - not badmouthing other advisors/strategies/products because of your specific planning philosophy.

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AllREIT wrote:pratoman wrote:Please shed some light on how, if an insurance agent, or RR, actually passes the exam, his credibility should be considered "unwarranted".
Because the knowledge gained and adviced dispensed will "solely incidental" to the core business of the sale of securities. It is minor dust.
I think you are painting a class with a very broad brush, which is a practice that has been proven throughout history, as being unfair, at best...     I think any RR who has taken the trouble to go thru the torture of gaininng the designation, has 1. the knowledge, and 2. demonstrated a value placed upon the core priniciple of professionalism, to be considered by any client who engages him or her, ans being "credible". I know the language of the code of ethics, and all the other rules and standards of practice, as well as the SEC requirements for being considered an advisor, such as "solely incidental". All I am saying, is that it is a gross mis statement to state that a CFP who is also a RR, is not "credible". In fact, doing so cheapens the CFP designation. 
So unimportant as to be unworthy of regulation per the SEC/NASD.
Quote:Did a wirehouse RR study less, or learn less to pass the exam than any other CFP? Whether the firm he is with allows him to act as a fiduciary or not, does he have less knowledge? And is it warranted that one would assume just because he or she is associated with a wirehouse or insurance agency, that the RR/insurance agent is NOT putting the clients interest first?
Well given that RR's operate in a framework where they explicitly do not put the clients best interests first....
There is no reason that a RR cannot operate in the framework to which you refer, which I assume means getting compensated on a commssion base, and not still act in a way that puts the clients interest first. I am not saying that all RR's do so. But lets face facts, not all non RR/insurance agent CFP's act in the best interests first in the true sense of the word.  Have  you ever known a CFP to refer a client to an Estates and Trusts Attorney, because that attorney has referred to him, when he might have referred the client to an attorney who was more knowledgeable in the area the client needed expertise in? I have.
I'm not saying that any single person is unwarranted, but as a class it is an issue. An unavoidable issue. Thus the CFP boards recent revision (and tightening up) of the code of ethics:
Quote:The revised standards require a CFP® professional to “at all times place the interest of the client ahead of his or her own.” The new language replaces the lower standard of “reasonable and prudent professional judgment” contained in CFP Board’s current Code of Ethics and Professional Responsibility.

The revised standards also require CFP® professionals who provide financial planning services do so with the duty of care of a “fiduciary,” a term partly defined as acting “in the best interest of the client.” The heightened duty of care significantly strengthens the current requirement that financial planning services be performed “in the interest of the client."
That's the difference between the best, and the suitable.
Again, I think you do an injustice to the CFP standard, when referring to anyone who has gone thru the rigorous training and testing to obtain the designation, as not credible, an again, i think it is not possible nor is it credible, to paint an entire class in such a fashion, as you admit you are doing. It casts a pall over those RR's who do truly care about their clients and put their interests first.
http://www.cfp.net/media/release.asp?id=161

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One additional point:
My firm, a wirehouse, has a platform which allows us to charge a client as an "advisor" to invest their money for an asset based fee. Within this account we monitor asset allocation, can use mutual funds, stocks, ETF's, bonds, etc. There is nothing allowed in the account that might give the appearance of conflict of interest, such as our parent companies stock, common or preferred. We get paid the same 1% whether the clients money is invested in stocks, bonds, cash, whatever.  If we use mutual funds, they are load waived a shares, or no load, and ANY 12B-1 fees are automatically credited back to the clients account as miscellaneous income. This is NOT a commission replacement acccount, it is a fee for advice account, that took a lot of work to get approved by the SEC.. I dont see how this is any different, in terms of how we get paid, than what an RIA/CFP does. Can you tell me that the RIA giving advice to a client on financial planning is not "incidental" to the trading of securities"?
Listen, we can debate this all day long, with no agreement, and it will become one of those threads that just perpetuates itself to no constructive end. My original point, and what I took exception to was the implication that any RR or Insurance agent, who has passed the CFP exam, and has attained the right to use the designation, is just using the designation to gain credibility which he'she doesnt deserve. My humble opinion is, that anyone who goes through the rigourous process required to get the CFP, deserves the credibility and respect or any client worthy of his or her attention. There will be rogues in any business profession/ business model, it shouldnt take away from the large number of good people who are dedicated to improving core competency in the interest of serving the client.
 

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pratoman wrote:AllREIT wrote:pratoman wrote:Please shed some light
on how, if an insurance agent, or RR, actually passes the exam, his
credibility should be considered "unwarranted".
Because the knowledge gained and adviced dispensed will "solely incidental" to the core business of the sale of securities. It is minor dust.
I think you are painting a class with a very
broad brush, which is a practice that has been proven throughout
history, as being unfair, at best...     I think
any RR who has taken the trouble to go thru the torture of gaininng the
designation, has 1. the knowledge, and 2. demonstrated a value
placed upon the core priniciple of professionalism, to be
considered by any client who engages him or her, ans being
"credible". I know the language of the code of ethics, and all the
other rules and standards of practice, as well as the SEC requirements
for being considered an advisor, such as "solely incidental". All
I am saying, is that it is a gross mis statement to state that a CFP
who is also a RR, is not "credible". In fact, doing
so cheapens the CFP designation. 
So unimportant as to be unworthy of regulation per the SEC/NASD.
Quote:Did a wirehouse RR study less, or learn less to pass the exam
than any other CFP? Whether the firm he is with allows him to act as a
fiduciary or not, does he have less knowledge? And is it warranted that
one would assume just because he or she is associated with a wirehouse
or insurance agency, that the RR/insurance agent is NOT putting the
clients interest first?
Well given that RR's operate in a framework where they explicitly do not put the clients best interests first....
There is no reason that a RR cannot operate in
the framework to which you refer, which I assume means getting
compensated on a commssion base, and not still act in a way that puts
the clients interest first. I am not saying that all RR's do so. But
lets face facts, not all non RR/insurance agent CFP's act in the
best interests first in the true sense of the
word.  Have  you ever known a CFP to refer a client to
an Estates and Trusts Attorney, because that attorney has referred to
him, when he might have referred the client to an attorney who was more
knowledgeable in the area the client needed expertise in? I have.
I'm not saying that any single person is unwarranted, but as a class
it is an issue. An unavoidable issue. Thus the CFP boards recent
revision (and tightening up) of the code of ethics:
Quote:The revised standards require a CFP® professional to “at all times place the interest of the client ahead of his or her own.” The new language replaces the lower standard of “reasonable and prudent professional judgment” contained in CFP Board’s current Code of Ethics and Professional Responsibility.

The revised standards also require CFP®
professionals who provide financial planning services do so with the
duty of care of a “fiduciary,” a term partly defined as acting “in the best interest of the client.” The heightened duty of care significantly strengthens the current requirement that financial planning services be performed “in the interest of the client."
That's the difference between the best, and the suitable.
Again, I think you do an
injustice to the CFP standard, when referring to anyone who has
gone thru the rigorous training and testing to obtain the designation,
as not credible, an again, i think it is not possible nor is it
credible, to paint an entire class in such a fashion, as you admit you
are doing. It casts a pall over those RR's who do truly care about their clients and put their interests first.
http://www.cfp.net/media/release.asp?id=161

1) Prato, I think very highly of the CFP designation. Therefore I'd be concerned about the framework in which it exists.

Just like a how a small gang at Aurthur Anderson, caused irreparabile
harm to the CPA profession, a smallish number of bad actors with CFP's
has the potential to do the same. Especially when operating in a
framework of reduced ethical standards, as happened in the past

A CFP (especially with the new standards) imposes a higher standard than the NASD RR standards.

I think this whole industry would be better off if everyone was held to
that same high standards, vs the current zoo, which includes CSA's
running around.

I think the new CFP is very good thing, and look positively upon people
who have that education and stick to the ethical standards of the CFP
Board.

2) I hope this NYT times article (which was front page, above the fold)
will raise awareness about CSA's, annuity sharks, and EIAs. This can
only be to the benefit of legitamate financial planners.

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pratoman wrote:One additional point:
My firm, a wirehouse, has a platform which allows us to charge a
client as an "advisor" to invest their money for an asset based fee.
Within this account we monitor asset allocation, can use mutual funds,
stocks, ETF's, bonds, etc. There is nothing allowed in the account that
might give the appearance of conflict of interest, such as our parent
companies stock, common or preferred. We get paid the same 1% whether
the clients money is invested in stocks, bonds, cash, whatever. 
If we use mutual funds, they are load waived a shares, or no load, and
ANY 12B-1 fees are automatically credited back to the clients account
as miscellaneous income. This is NOT a commission replacement acccount,
it is a fee for advice account, that took a lot of work to get approved
by the SEC.. I dont see how this is any different, in terms of how we
get paid, than what an RIA/CFP does. Can you tell me that the RIA
giving advice to a client on financial planning is not "incidental" to
the trading of securities"?

That type of IAR account is the same as what I'm doing. In that space
you are compensated solely by the client and not from the sale/trading
of securities.

With that type of account, the advice is integral to the account and compensation. With a fee-in-lieu account or traditional commisioned account, that advice is "solely incidental" and the duty of care is much lower.

The future of this industry is IAR's servicing those types of accounts.
It was the Fee-in-leiu accounts that got everyone fired up. Since
externally it looked like an advisory account, but had a much lower
ethical standard.

Sort of like chinese toothpaste.

troll's picture
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pratoman wrote:I really respect all the indies on the board, not only because you guys have a lot to contribute, but because you had the balls to take the risk. But jeez, sometimes you guys can really get on your high freaking horses!! There really are RR's out there who take great care of their clients. really! And the ones who have earned the CFP designation by taking the same 2 day exam as the rest of the CFP's have just as much right to use the designation as a f**kin indie, RIA or any other person who dispenses advice. Prato-This isn't about indy vs. wire vs. bank.  It's about RIA's versus Reg Reps versus Dually Registered.AR, there are things I like about the positions you take, and you give me some interesting things to think about.But, IMHO, on this particular issue you really have climbed up on your high horse.  I'm dually registered and very happy to be.  My clients know that sometimes they pay me comissions, and they have no problem with that.Some clients prefer to pay commissions, and for others(smaller clients, life insurance cases, etc) a commission based platform is more effective.  That doesn't change the ethical core that I've guarded from day one in the business.Hey look, if your can opener works for you, great.  But don't expect that nonsense to wash with me, or with my clients.

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" Again, I think you do an injustice to the CFP standard, when referring to anyone who has gone thru the rigorous training and testing to obtain the designation, as not credible, an again, i think it is not possible nor is it credible, to paint an entire class in such a fashion, as you admit you are doing. It casts a pall over those RR's who do truly care about their clients and put their interests first. "
Allreit absurdly and continuously tries to define the "moral" and intellectual playing field, but can't be objective because of his own conflict of interest, from a full service planner's point of view, because he is not licensed for insurance or to handle certain securities, for example, if a client comes to him with A shares. For that matter, it remains to be seen how regulation of his platform will compare with the highly regulated insurance and broker dealer platforms. As many jump over to RIA, watch out, this whole high horse arguement may go tumbling off the embankment.

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Good Points

troll's picture
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AllREIT wrote:1) Prato, I think very highly of the CFP designation. Therefore I'd be concerned about the framework in which it exists.Just like a how a small gang at Aurthur Anderson, caused irreparabile harm to the CPA profession, a smallish number of bad actors with CFP's has the potential to do the same. Especially when operating in a framework of reduced ethical standards, as happened in the pastA CFP (especially with the new standards) imposes a higher standard than the NASD RR standards.I think this whole industry would be better off if everyone was held to that same high standards, vs the current zoo, which includes CSA's running around.I think the new CFP is very good thing, and look positively upon people who have that education and stick to the ethical standards of the CFP Board. 2) I hope this NYT times article (which was front page, above the fold) will raise awareness about CSA's, annuity sharks, and EIAs. This can only be to the benefit of legitamate financial planners.
Airreit:
1. I dont disagree with those comments at all. Why cant an RR be held to the higher standard as well? If an RR is an Indie he should be held to the higher standard. Andl, as far as I know (I am admittedly not that knowledgeable on the Indie setup), CAN be. He can charge a fee for a plan, and give the client the option to go elsewere to execute, which I know many do. As far as RR;s in the wirehosues, they should be, b ut the problem is that the wirehouses dont want their RR;s to act in a fiduciary capacity, which makes no sense to me.
I can only speak for myself in that I always put the clients interests first, and still manage to make a decent living.
2. Read the NYTimes article and was happy to see the joke of CSA's and all the other ridiculous titles exposed for what they are, and equally happy to see the CFP and CFA titles put in a different light
As an aside, I amin the process of attempting to pass the CFP now, and cant imagne anyone going thru this JUST to get a "designation", or a few letters after their name.

troll's picture
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AllREIT wrote: pratoman wrote:
One additional point:
My firm, a wirehouse, has a platform which allows us to charge a client as an "advisor" to invest their money for an asset based fee. Within this account we monitor asset allocation, can use mutual funds, stocks, ETF's, bonds, etc. There is nothing allowed in the account that might give the appearance of conflict of interest, such as our parent companies stock, common or preferred. We get paid the same 1% whether the clients money is invested in stocks, bonds, cash, whatever.  If we use mutual funds, they are load waived a shares, or no load, and ANY 12B-1 fees are automatically credited back to the clients account as miscellaneous income. This is NOT a commission replacement acccount, it is a fee for advice account, that took a lot of work to get approved by the SEC.. I dont see how this is any different, in terms of how we get paid, than what an RIA/CFP does. Can you tell me that the RIA giving advice to a client on financial planning is not "incidental" to the trading of securities"?
That type of IAR account is the same as what I'm doing. In that space you are compensated solely by the client and not from the sale/trading of securities. With that type of account, the advice is integral to the account and compensation. With a fee-in-lieu account or traditional commisioned account, that advice is "solely incidental" and the duty of care is much lower. The future of this industry is IAR's servicing those types of accounts. It was the Fee-in-leiu accounts that got everyone fired up. Since externally it looked like an advisory account, but had a much lower ethical standard. Sort of like chinese toothpaste.
I couldnt agree more. It is why I am making that platform a more and more integral part of my practice. Perhaps that this the answer for wirehosue RR's who are and want to practice as CFP's.

troll's picture
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So Prato how is the studying going?

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joedabrkr wrote:So Prato how is the studying going?
Yucchh!
This weekend, got a 78 on a 40 question test taken from the actual 2004 cfp EXAM, INcluded a case study. Felt great. Then I took a 100 question MC exam, got a 54. Shoot me.
 

troll's picture
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pratoman wrote:joedabrkr wrote:So Prato how is the studying going?
Yucchh!
This weekend, got a 78 on a 40 question test taken from the actual 2004 cfp EXAM, INcluded a case study. Felt great. Then I took a 100 question MC exam, got a 54. Shoot me.
 I hear ya.Just keep plugging along.  You're in much better shape than you were when you first posted about this a few weeks ago.  Just think....every little bit you add to your knowledge base over the next 2 weeks potentially adds 2-3 points to your score.  So just think of it as if you're simply picking up a couple points with every page you turn....

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I remember thinking of the exam as me being an airplane, hurtling down the runway, trying to achieve lift off. All you have to do is clear the trees. Just barely clear the trees, and achieve flight. It is completely consuming - when you make it, you'll have even more perspective. Just clear the trees, you already have enough speed - don't worry if you stumble or ignore some test questions - do the easy stuff first on the test where you can.

troll's picture
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Thanks for the advice. Spoke with Keir today, they tell me tha 100 q exam had a lot of insurance questions on it (i sort of sensed that as I was taking it). I also realize there were no calculation q's on it, which there will be on the actual exam, and I am pretty ggood at that. They said that getting a 78 on the 40 question exam taken from the acual 2004 CFP exam is a good indication that I am on track. Still, keeping a deer in headlights mentality, gotta keep working hard for 2 more week.s

troll's picture
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Joined: 2004-11-29

GolFA wrote:I remember thinking of the exam as me being an airplane, hurtling down the runway, trying to achieve lift off. All you have to do is clear the trees. Just barely clear the trees, and achieve flight. It is completely consuming - when you make it, you'll have even more perspective. Just clear the trees, you already have enough speed - don't worry if you stumble or ignore some test questions - do the easy stuff first on the test where you can. Nice analogy....

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