Word to the Wise, Says Cerulli: Don’t Call Yourself a Financial Planner If You’re Not Qualified

Financial advisor, know thy self—and definitely know thy job description.

That’s one key takeaway from the latest research by Scott Smith of the research firm Cerulli Associates, who recently looked at the way 1,500 financial intermediaries classify themselves and their job titles as part of a Cerulli metrics update and concluded that a good many professionals were “overly aspirational,” suggesting they can offer a significantly higher level of customer service than is really the case.

Much of it comes down to the way many financial advisors refer to themselves, says the Cerulli analyst. A full 59 percent were calling themselves financial planners when Cerulli considers them investment planners—a different category altogether. Only 22 percent called themselves investment planners. In truth, “It’s more like 56 percent,” Smith tells eFinancialCareers.

Meanwhile, only 30 percent or slightly more than half of those calling themselves financial planners authentically fit Cerulli’s planner definition. The difference is that financial planners are capable of compiling comprehensive financial plans that include more than just investment plans for clients and end up being 100 pages thick, Smith explains. Financial planners are also apt to incorporate life insurance and estate planning into the mix of financial tools their clients might use to reach their goals, he says.

Then there are those Smith would put into the category of “investment planner”—those who tend to plug information into a retirement accumulation calculator or some other formula in order to show a client how to reach his or her financial goals over a set period of time, without the detailed investment plan and usually without the insurance and estate planning angles. These are areas financial planners are comfortable dissecting, but not everyone is able to understand their nuances.

Clearly, from a job-hunting perspective, Smith says, “You need to know what still moves the needles in an advisory shop.”

What’s important is to separate your own personal aspirations from those of the firm you’re applying to—and to make sure you don’t inflate your abilities beyond what they actually are. Because employers frown on overdoing, it could cost you a job you really wanted and may have been entirely qualified for.

Here are the four categories into which Cerulli divides what it calls “financial intermediaries”:

1. Money manager. “These are the stock pickers of yesteryear,” says Smith. They are essentially portfolio builders and managers.
2. Investment planner. This is someone who is apt to plug basic information into a formula and offering a small amount of advice to the customer.
3. Financial planner. This is someone capable of providing customers with a comprehensive and personal financial plan. Many have the Certified Financial Planner designation.
4. Wealth manager. Same as a financial planner, but offering services to high net worth customers with a minimum of $2 million in investable assets.

Of the 1,500 professionals Cerulli considered, 9 percent told Cerulli they were money managers and Smith said Cerulli didn’t contest it. “If they say they only manage money, we won’t question them,” he explains.

Cerulli identified 11 percent of its sample as wealth managers, while only 6 percent of survey respondents used that term to describe themselves. Here, Smith says, some of the financial intermediaries Cerulli looked at may have been serving lower wealth tiers than they felt were applicable to the wealth management tag, and some may not have felt they were doing planning comprehensive enough to fit the bill.