I am on a flight to San Diego where I will be joined by over 1,500 of my colleagues for a broker-dealer’s national conference. Just before wheels up, I went to check out the front page of MarketWatch, as I often do each morning, to see some pre-market headlines. Not more than one half-swipe down the screen of my iPhone there you were, Tony Robbins, celebrity financial advisor. The specific article I am referring to is an opinion piece you wrote on October 11 titled “7 questions you must ask to keep a financial advisor honest.” It’s very popular topic frequently covered by financial professionals who, like you, want to ensure that people find themselves working with advisors, like us, who put the interests of their clients above all else. It’s all about that f-word, Tony: “fiduciary.”
Coincidentally, I just wrote a very similar column for Fatherly.com last month. Like I said, it’s a popular topic. Your article started off strong and your preamble contained an important point. That is, most financial professionals are not fiduciaries. Yes, it is true. Way too many of us continue to follow an old brokerage model, which is without doubt, an antiquated way of doing business. It’s transactional by nature, commission-based and generally fails to align our compensation with our client’s interests. The good news is that we both clearly see things are moving in the right direction and, arguably, more quickly than ever before. Perhaps, while we’re still in the business, we will get to see the day when everyone operates as a fiduciary.
Look, I think it’s very thoughtful of you not to indict all the “good people that work in the industry.” But let me be blunt: you indicted so, so many of us. I really can’t complain about some of the questions you asked, but let’s run through them to see why I find myself writing you this open letter.
- Are you a registered investment advisor?
- Are you or your firm affiliated with a broker-dealer?
These first two questions both strive to separate financial advisors into two categories. Those who are registered as investment advisors (RIA) and those advisors who are registered with a broker-dealer (BD). And you are correct in stating that RIAs are fiduciaries. However, you are incorrect in asserting that advisors registered with a BD are not. Further, it’s insulting and frustrating to instruct a reader to “run for their life!” when he or she is considering an advisor registered with a BD. It’s just not as black and white as you make it out to be and, what’s worse, I believe you know that.
For example, I am registered with an independent broker-dealer, but I am also a fiduciary. I have access to commission-based investment products, but I choose not to sell them because I, like you, believe that when it comes to giving financial advice or managing money, a fee-based compensation model is the right way to do business. So what about all the Certified Financial Planners (CFP®) currently registered with a BD, Tony? Are they all not fiduciaries? Regardless of your answer, I encourage you to look me up and then tell me that people should run for their lives. You can’t, because doing business with an advisor at a broker-dealer and being a fiduciary are not mutually exclusive.
But I get it. It’s easier to throw the whole lot of us BD-affiliated advisors into the “bad guy” category because, let’s be real, this is the area of the industry where most of the “bad guys” hang out.
Sparking change is hard, especially in our industry, and with more advisors over the age of 70 than under 30, it’s not hard to see how we still have so many professionals operating like the internet doesn’t exist. They come from the era when cold calling and trading frequently to earn a buck was the norm. But, Tony, just because the financial services industry struggles to streamline things for the public, doesn’t mean you should paint with a broad brush, hoping to provide clarity for the masses. As my article points out, you must dive deeper when trying to find a financial advisor to work with. You didn’t even mention the basics like to look at a one’s educational background, compliance record, industry experience, credentials and compatibility. Clearly, these are all important factors to consider before hiring an advisor.
- Does your firm offer proprietary mutual funds of separately managed accounts?
- Do you or your firm receive any third-party compensation for recommending particular investments?
- What’s your investment philosophy when it comes to investing?
Questions three through five are clearly investment-related, which is a major issue that I will address in just a moment. However, on their own, these questions are pretty good because selling proprietary products of any kind or receiving third-party commissions and kickbacks should be a non-starter by any measure. How can an advisor come off as being objective when operating this way? I agree with you, they can’t. Oh, and kudos on question number five as it’s very relevant in today’s “fee conscientious” environment. There’s little question that an advisor’s investment philosophy directly translates to the types of investment products they use and, therefore, the costs clients will incur.
So then, what’s the beef with asking this set of questions? It’s that we’re talking about investments! In my book, The Millennial Money Fix, I call investments the “sizzle of personal finance” because in the relatively boring world of personal finance, investments are as sexy as it gets! The big problem here is that investments, no matter how attention-grabbing they are, remain a distant second to the overall importance of financial planning and conflict-free financial advice. Not surprisingly, though, the question relating to this point made it second to last on your list. (cue sad trombone)
- What financial planning services do you offer beyond investment strategy and portfolios management?
- Where will my money be held?
These questions highlight exactly why you’re not helping. Your article, like much of your content relating to personal finance, is about investing. As an ambassador for the CFP Board of Standards—a nationally recognized industry leader and a voice for next generation advisors everywhere—I humbly ask that you reconsider your approach and help shift the focus away from investments and squarely on to financial education, planning and advice. If we can do that, Tony, we won’t have to rely on broad assertions to understand how the 310,000 advisors in the U.S. do business. Only then can the industry completely change to rid itself of conflicts that end up doing harm to good people. Any only then can we prevent financial meltdowns like we’ve witnessed in 2008, and avoid crooks like Bernie Madoff (which, by the way, addresses your final question).
Tony, your platform is too big to get this one wrong! Oh how I’d spread the gospel of financial planning and education if I commanded even one tenth of your audience. Once again, this is where the conversation should start for everyone, especially the hard-working millennials I serve. Earlier this year, I couldn’t help but to scream at my computer screen when you visited Gary Vaynerchuck on his show to discuss your latest book, Unshakable. I was so upset because lessons on investing and the financial markets are not the first lessons young hustlers need to learn—unless you’re discussing the “investment” they’re making in themselves. These young entrepreneurs first need a strong foundation in personal finance, which unfortunately most don’t receive until they make their first mistakes. I understand you were promoting your book, but this was a golden opportunity to set the record straight for those who need it most! There’s still time, Tony.
Without a doubt, investments are a critical part of the overall process and your opinions regarding them are generally solid, but if we keep making this the first thing we advisors talk about, we’re only going to delay the changes already taking place. Worse yet, we’re going to miss out on helping others make informed financial decisions. Tony, I invite you to join me and other leaders in our field on getting the message right once and for all. We need advisors, with influence like you, to help amplify the voice of a movement that’s already taking place. Will you answer the call? I can’t wait to hear from you.
Douglas A. Boneparth, CFP®, Financial Advisor
Douglas A. Boneparth is New York City’s Financial Advisor for Millennials and the president of Bone Fide Wealth, LLC, a Manhattan-based wealth management firm. He is also the CFP® Board Ambassador for New York. Follow him on Twitter: @dougboneparth.