In a recent LinkedIn post, a young financial advisor I know proudly announced that he had earned his CFP® designation and was now a “Certified Financial Planner.”
Had the CFP Board seen this post, they may have given him a red card. Why? Because according to their usage standards, CFP® certificants can’t call themselves Certified Financial Planners. They can call themselves “CERTIFIED FINANCIAL PLANNER™ professionals” or “CFP® professionals” (or practitioners), but they can never use the designation as a noun, since it’s not a license.
He isn’t the first financial advisor I’ve known who has made these kinds of mistakes. After years of working with many advisers on their websites, sales and marketing collateral, and business cards, I’ve identified some very common errors or misuses of phrases, titles, and designations that, if left uncorrected, might not only cause reputational damage but, in extreme cases, could result in liability or regulatory risk.
A Bigger Deal Than You Think
I don’t believe that most advisers make these mistakes intentionally. In some cases, these language lapses get missed by compliance departments. In other cases, advisers use words and phrases that are made up by the financial industry that have no genuine legal standing.
Most advisers may not think these errors are a big deal, but it is important for registered representatives and investment advisers to be fully transparent and accurate in the way they describe their role, their services, their qualifications, and their compensation structure.
Here are five of the most common mistakes I routinely see.
1. Using the Non-Existent Title ‘Registered Investment Advisor’ (RIA)
Over the past two decades, I’ve noticed many investment professionals calling themselves registered investment advisers (or, more commonly, advisors) or RIAs.
Let’s get this straight. A Registered Investment Adviser (-er only) is always a company registered with a state or the SEC (or both). Any investment professional who works in one of these firms is an investment adviser or, more accurately, an investment adviser representative, or IAR.
So why this widespread use of RIA by individuals?
I blame the mutual fund companies. Since the late 1990s, they’ve side-stepped SEC definitions by inventing the term “registered investment advisor” to define the independent IARs to whom they market various custody, clearinghouse and back-office services.
I know this from experience. Many years ago, I served on the marketing team for the institutional brokerage services division of a large fund company that was launching a specific website targeting individual “registered investment advisors.” A version of this website still exists today.
If you’re calling yourself an RIA, just stop it immediately. You’re licensed as an investment adviser. If someone looks you up on https://adviserinfo.sec.gov, that’s the title they’ll see. Why muddy the definitional waters?
2. Unqualified ‘Financial Planners’
I’ve already mentioned the incorrect usage of the CFP® designation. But at least these professionals went through the effort to earn this credential.
There are still plenty of advisers out there who call themselves financial planners even though they’ve never earned CFP®, ChFC®, CRPS®, or other industry-recognized professional financial planning designations. This practice is deceiving and unethical. Advisers who want to add financial planning to their service menus should make the effort to get the education and designations they need to offer these services legitimately.
3. Using College Degrees in Titles
I can’t tell you how many advisers (particularly on LinkedIn), use a title such as “Frank Harrington, MBA.”
Sorry, but a graduate degree — particularly one as ubiquitous as an MBA — isn’t an industry designation or professional qualifier. Neither is a PhD or a JD degree, even if they’re used to create the impression that the adviser is highly educated.
There’s no correlation between advanced degrees and the ability to manage investors’ money. The only acronyms advisers should use after their names are relevant professional designations.
4. Designation Overload
On the other hand, it is very possible to go overboard on “title designations.”
For example, one adviser I know uses this alphabet soup of acronyms on his business card and marketing materials:
[Not his real name] Kevin Johnson, CFP®, CPWA®, CLU®, CFA®, CFS®, CMT®, CIS™
What is the average client supposed to make of this “C soup”?
They may know what CFP means, but the other acronyms will leave them scratching their heads. And many of them aren’t relevant. For example, how many CFA (Chartered Financial Analyst®) designees other than chief investment officers actually conduct extensive technical investment analysis when evaluating mutual funds to recommend to clients? What good is boasting a CMT (Chartered Market Technician®) designation if advisers aren’t constantly trading stocks?
If you’re a serial designation earner, be proud of the knowledge you’ve gained. But only use the acronyms for designations you use in your daily practice.
5. Misuse of ‘Fee-Only’
Most investors don’t know whether their investment adviser is fee-based or fee-only, nor can they explain the differences between these two very important distinctions.
While many dually registered investment advisers earn 100% of their compensation from advisory or financial planning fees paid directly by clients, the fact that they still maintain a securities license with a broker/dealer relationship means that they should never call themselves fee-only. At most, they can call themselves “fee-based” (another nebulous term that few investors understand).
More important than the term an adviser uses is the explanation of what it means.
For example, one fee-based adviser I know has been asked this question so often that, along with her lengthy Form CRS and Form ADV documents, she gives every prospect a two-column compensation description chart with “fee-based compensation” on the left and “commission compensation” on the right. Under each column, she lists the specific services she provides that fall within each compensation model. She also indicates whether she applies the fiduciary or suitability standard for each service and describes, in simple terms, what each standard means.
Doing so makes her more transparent and accountable and helps her clients know exactly how she will be paid — and where conflicts may exist.
It’s a Matter of Trust
It’s hard for advisers to keep up with a complex competitive and regulatory milieu where the rules are constantly being rewritten and competition for new clients is fierce. In these circumstances, it’s understandable that an adviser might incorrectly choose the wrong words or acronyms to describe who they are and what they do.
Nevertheless, in an industry whose legitimacy is grounded in the trust investors place in their financial professionals, it should be in the best interests of advisers to describe their role, their qualifications, and their business model simply and accurately. So, there’s no question in their clients’ minds as to who they are and why they’re qualified to help them achieve their financial and investment objectives.
Jeffrey Briskin is director of marketing at a Boston-area financial planning firm and the principal of Briskin Consulting, which provides content and digital marketing services for asset managers, TAMPs, trust companies, and fintech firms.
