Study Shows Many Financial Professionals Misrepresenting Their Expertise

According to a recent study, it appears that many financial professionals “tend to overstate their qualifications and services.” Investment News recently reported on the study done by Cerulli Associates Inc. in which they studied the responses of upwards of 1,500 “financial intermediaries.” A Cerulli analyst, Mr. Scott Smith, was quoted in the article as saying, “Most advisers don’t want to say that they don’t offer some kind of service, so they are more likely to overstate their capabilities.”

The reason for this “pattern of misrepresentation” has to do with differences in designations for financial professionals. Mr. Smith told the publication that “We found that 59% of respondents were calling themselves full-scale financial planners, when it fact many of them were actually investment planners.”  The study found that only 30% of those financial professionals fit Cerulli’s definition of a “financial planner.”

The article notes that financial planners generally “…[work] with clients to build comprehensive plans that include insurance and estate planning.” Alternatively, investment planners “focus on asset management, retirement and college savings plans but tend to offer more-modular-style plans.” Only 22% of industry respondents called themselves investment planners while according to Cerulli and Mr. Smith “56% of respondents are actually investment planners.”

Mr. Smith reportedly told Investment News that he believed that the “discrepancy could be attributed to that fact a lot of advisers view themselves as being more comprehensive than they actually are, simply because they believe they have the potential to be more comprehensive.” Cerulli’s study does not seem to indicate any willful fraud on the part of the financial professionals, but it does seem to indicate a need for investors, and others seeking financial advice, to ask plenty of questions and do significant research when deciding which financial professional to choose.

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