Financial Advisor (CFP) Horror Story

[intercst]

This morning's Dallas Morning News has an excellent story by Scott Burns on the perils of working with a financial adviser. It's even in bold type.

http://www.dallasnews.com/sharedcont....17b9a9b8.html

The following note from J.T., a Dallas CPA, is a good indication that the financial services industry has a long, long way to go before it earns our trust and respect:

My 79-year-old mother was referred to an investment adviser (CPA/CFP) who made some amazing investment suggestions.

She told him that she is not a millionaire and primarily invests in CDs with a few no-load mutual funds at Vanguard or Fidelity.

She has no debt, hates risk but wants good return, and doesn't like to pay taxes.

When I spoke with the Dallas-based adviser about his top two choices for my mother, here is what he suggested:

Section 42 Fund: Invests in low-income housing credits, requires a 10- to 12- year time horizon, has a 25 percent load and an IRR (internal rate of return) of 7 percent.

Senior Subordinated Debt Unit Investment Trust Fund: requires a 5-year time horizon, has a 10 percent load and is currently earning 5.4 percent to 5.9 percent.

I told him thanks but no thanks and told my mother to never speak with this gentleman again!

I thought I'd pass along a most amazing tale since this adviser is working with some of my mother's friends.

</snip>

Question for any of the highly ethical, highly professional CFP's who follow this board. How long does it typically take for a CFP who recommends a product with a 25% load to a 79-year-old woman to be drummed out of your organiztion?

intercst

[saluki9]

Question for any of the highly ethical, highly professional CFP's who follow this board. How long does it typically take for a CFP who recommends a product with a 25% load to a 79-year-old woman to be drummed out of your organiztion?


Well, I can only speak for the company I work for. I'd say not long if they ever even made it into our org. I'm not a planner, but I manage the investment side for a bunch of them. There is a reason they have me, because the CFP program isn't there to teach you investments. It's purpose is to teach planning, which is a different thing all together.

That's pretty terrible, but there are people like that in all professions.

[Nords]

Originally Posted by intercst

... any of the highly ethical, highly professional CFP's who follow this board...

Oxymoronic, ironic, or just cynical sarcastic satire?

Question for any of the highly ethical, highly professional CFP's who follow this board. How long does it typically take for a CFP who recommends a product with a 25% load to a 79-year-old woman to be drummed out of your organiztion

The guy should be arrested and charged with Fraud. I cannot believe it could actually be legal to do this!

[Texas Proud]

He probably will never be 'drummed out' as the CFP is not regulated like CPA. If he has his own shingle hanging out, he can do this forever as long as people are willing to pay him. I doubt he is in a legit investment company.

[wildcat]

From what I know the CPA designation requires you to act in the best interests of the client. If a CPA does not then she/she could lose the designation. Almost like any other professional designation. CFP does not require any such thing.

[Olav23]

I was actually most surprised that a fund can even legally charge a 25% LOAD! That seems almost like usuary or something, or raising the price on wood pre-hurricane!

[Texas Proud]

Originally Posted by Olav23

I was actually most surprised that a fund can even legally charge a 25% LOAD! That seems almost like usuary or something, or raising the price on wood pre-hurricane!*

As long as it is fully disclosed it is probably legal. I rememeber some real estate trust way back when that had a charge like that, but they made it look so good people bought them anyhow.