Financial Advisors Morph Into Consultants With Increasingly Demanding Educational Standards

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Advisors are increasingly targeting higher net worth clients needing more detailed and informed financial advice, while seeking to add still more letters after their titles.

As recently as 10 years ago, the hiring and training that went on in the advice space was clearly "sales-oriented," observes Robert Seaberg, managing director at Morgan Stanley Smith Barney in New York.

It was all about "the art of persuasion-how to close," recalls the executive, who began his own career 25 years ago at AG Edwards before the company was acquired, first by Wachovia and later by Wells Fargo.

"Today, it's a more complex world-in order to position solutions, you need to understand finance, markets and the economy at large," Seaberg says. "Individuals don't want to be sold anymore. They want to be educated."

Generally speaking, "[t]here's been a conversion from brokerage to consulting," says Sean Walters, CEO and executive director of the Investment Management Consultants Association (IMCA) in Denver, Colo.

The sales-oriented "broker" has basically morphed an information-laden financial consultant, and that has created the need for more and more voluntary education, aside from any required licenses to sell products.

Along with this trend has come the movement from commission-based business to a fee-based model.

"Probably 10 to 15 percent of our members (61 percent of whom are with national wirehouse banks) still have some revenues coming from commissions, and insurance product sales are still primarily commission-based, but the predominant role aside from insurance products is the fee-based model," says Walters.

He observes that regulatory and consumer pressures are responsible since federal officials and sophisticated customers are "demanding this shift" where advisors can't benefit from selling clients on specific products or simply doing transactions.

Brave new world of ultra-high net worth

Among the many certifications and designations available to planners and advice givers these days, one of the newest to hit the street is the Certified Private Wealth Advisor (CPWA) designation available through IMCA.

The CPWA emerged four years ago to target the requirements of those advisors serving high net worth ($5 million in assets and above) and ultra-high net worth clients, where advisors are clearly finding "a new set of challenges," says Walters.

In the U.S., there are now some 63,000 Certified Financial Planner (CFP) "certificants," says Walters, along with 6,141 Certified Investment Management Analysts with IMCA's CIMA certification and 447 new CPWA designees.

At Morgan Stanley Smith Barney, meanwhile, the company is internally offering a rigorous educational program for its Family Wealth Directors targeting customers with $10 million in assets and more. The program takes over a year to complete and includes 14 different modules for advisors to master in advance of a several-hour exam. Subjects include family governance and dynamics, hedging and monetization, restricted and controlled stocks, business succession planning and asset protection.

The high net worth and ultra-high net worth marketplace being targeted by so many firms these days is ripe with advice needs and sales opportunities, observes recruiter Richard Lipstein of Boyden Global Executive Search in New York.

Moreover, advisors l have moved to a "lifelong learning" phase and are no longer just meeting minimum compliance standards or adhering to a code of ethics, says Walters.

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