目前，唯一較有公信力、需具備一定專業經驗並通過相當嚴謹考試、符合「繼續教育」要求而獲得的資格，是「注冊理財計劃師(Certified Financial Planner)」，簡稱為CFP。事實上，只有部分「理財顧問」，具有這個名銜。
所謂「理財規劃」，是指按投資者整體情況和需要，訂立一個適合個人的全面財務計劃，通過不同的投資工具，達到長期財務目標。理財規劃，應該以客戶本身的需要和利益作出發點，並考慮到保險、稅務、遺產規劃、子女教育、退休安排等因素。理想的財務顧問，應與客戶沒有任何「利益衝突(conflict of interest)」。當然，財務顧問本身的經驗與誠信，亦極其重要。
Financial Plans: Selling For In-House Gains?
By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
John Haritos Jr. was looking to cut his tax bills and save for retirement when he agreed to a free financial consultation with American Express Financial Advisors. Told his finances wouldn’t allow him to meet his retirement goals, Mr. Haritos, 37 years old, paid $500 in July 2000 for a financial plan. Recalls Mr. Haritos: “I figured I was paying for … unbiased advice."
He now says he figured wrong.
What did Mr. Haritos get? A laundry list of American Express products he should buy. So he moved $26,000 from a money-market fund into a brokerage account that charged a flat 1.5% a year and invested largely in high-fee mutual funds. He also transferred his $4,000 individual retirement account to American Express and rolled a life-insurance policy into an annuity run by IDS, also a unit of American Express Co. Nearly all of the investments, which generated high fees for AmEx and its advisers, fared poorly.
Mr. Haritos soon cashed out and sued the firm. American Express is contesting the charges, saying in filings with a federal court in Arizona that the written disclosures to clients “are more than enough to constitute ‘storm warnings’ that the Financial Plans may not be as ‘objective’ or ‘unbiased’ as supposedly represented."
Financial plans have exploded in popularity in recent years as brokers, insurance agents and other financial advisers have touted their benefits. Roughly 9.5 million households obtained a financial plan from mid-2000 to mid-2002, up from 6.6 million in a 1998 survey, according to SRI Consulting Business Intelligence, a research and consulting firm based in Menlo Park, Calif. Another 6.6 million received a retirement plan, the survey found.
Investors who sign up for financial plans believe they are getting independent advice tailored to their own needs. But in one of several “open secrets" that have been hazards for investors in this era, these plans often are little more than sales tools that stand a better chance of making money for advisers and their firm than their clients.
Critics say advisers rarely disclose that they get big bucks for directing investors to insurance products and mutual funds that provide the highest payouts, rather than offering investments that may pay the adviser less but are better-suited to the client’s needs. Any information about potential conflicts is often vague at best and tucked into documents provided to investors when they are already well into the planning process.
A good financial plan can be useful to chart an investor’s future, of course. But “for a number of advisers it is a marketing hook," says Matthew McGinness, an associate director with Cerulli Associates, a market-research firm.
Many financial firms that provide such plans also offer proprietary, or in-house, financial products. The potential for conflicts at American Express is intense because of its large stable of in-house mutual funds and insurance products. Proprietary products account for roughly 65% of adviser sales at AmEx, a regulatory filing says.
Many AmEx funds have been poor performers. Over the past three and five years, AmEx funds have, on average, ranked in the bottom third of all fund families, according to fund-tracker Morningstar, Inc. And AmEx receives special revenue-sharing payments from 11 outside fund families — including AIM, Putnam, Strong and Van Kampen.
An American Express spokesman says the company has been overhauling its fund operation in the past two years in an effort to boost returns. “We are absolutely committed to improving our performance," he says. Though fund performance has improved, AmEx funds still ranked in the bottom half of all fund families in the past 12 months, according to Morningstar.
American Express Financial Advisors carries a lower profile than the firm’s credit-card business, yet it accounted for roughly 24% of American Express’s $26 billion in revenue and 22% of its net income last year. Fees from financial plans and other advice services accounted for just $121 million of the unit’s $6.2 billion in revenue last year, according to regulatory filings. But the importance of planning to AmEx and the firm’s more than 12,000 advisers is far greater: Three-quarters of total sales were generated by financial plans and advice services.
Financial advisers use the planning process to draw clients in, but they depend on product sales for their livelihood, current and former advisers say. “The financial plan is their big claim to fame. But if that’s all you did, you’d starve to death," says Judy Reed, an adviser who left American Express in early 2002 after more than a decade with the company. Other former AmEx advisers say that when they presented a financial plan, they dubbed it “The Close," because of its usefulness in selling high-fee products, including proprietary funds and insurance that paid more to the salesmen — and to the firm.
An AmEx spokesman says “financial planning is at the core of what we do" and is “the best way to serve the needs of our clients," adding that the firm’s approach to financial planning is “comprehensive." While many clients buy financial plans from AmEx and then use the firm to follow its recommendations, others pay for plans and implement the suggestions elsewhere or simply buy products from the firm, the spokesman says. “It’s not one size fits all."
In some cases, the pressure to sell in-house products is overt. Peggy Bigelow, a financial adviser who left American Express in 2001 after a year with the firm, says she was repeatedly criticized for recommending that her clients invest in outside mutual funds. Other former advisers say the training they received focused largely on sales techniques and the company’s proprietary insurance products.
Mr. Haritos, a medical-equipment salesman in Mesa, Ariz., says he learned this lesson the hard way. When he discovered in 2001 that the investments recommended by his adviser were faring poorly, he closed the brokerage account, at a loss of roughly $14,000, or about 35% of his total investment, and moved his IRA to Charles Schwab Corp. He’s still holding the annuity, however, because he doesn’t want to pay a costly surrender charge.
His suit, filed in October seeking class-action status, requests the refund of all financial-planning fees plus interest, according to Jon E. Drucker, Mr. Haritos’s lawyer. Mr. Haritos says his AmEx adviser, Michael Vukonich, never told him he had financial incentives for recommending AmEx proprietary products, rather than outside investments offered by other companies. Mr. Vukonich declined to comment.
Other investors say they were directed to the firm’s in-house mutual funds and other proprietary investments. Pierre Gangloff, a software engineer in Boston, says he was looking for tax and investment advice when he paid $600 for a financial consultation in 2002. Mr. Gangloff says his adviser persuaded him to invest a total of more than $17,000 in a dozen different AmEx mutual funds. Mr. Gangloff also invested $500 a month in an IDS variable universal life policy and moved $8,000 from a money-market account to a less-liquid AmEx Market Strategy Certificate — a certificate of deposit tied to the Standard & Poor’s 500. “I had the impression I would be … hiring some professional … who would work for me to figure out the best alternatives," he says. “But they were really pushing the American Express brand."
Some AmEx customers say they didn’t learn about the potential conflicts until they were well into the planning process. Douglas Parker, a computer programmer in Baltimore, paid AmEx $450 for a financial plan in 2001. Mr. Parker says his AmEx adviser then sold him disability insurance, term insurance and two variable universal life-insurance policies run by IDS. Mr. Parker also rolled over $34,000 from three retirement accounts at Charles Schwab, T. Rowe Price Group Inc. and TIAA-CREF into AmEx annuities and an AmEx brokerage account that included investments in proprietary mutual funds. Mr. Parker says he didn’t receive any papers indicating that the adviser might have a conflict until after he had signed the planning agreement and rollover papers.
Says Mr. Parker: “They manage to get control of your funds before you know it."
Different financial planner charges different fees. Some tells you there is no charge, but then they push you to buy expensive financial products through them. Some of them are actually insurance salesmen or stockbrokers. It appears the certified financial planner you used is a real planner. Charging a flat fee is better than paying on the basis of the amount of investments, or the no-fee arrangement I mentioned above. 1% of income is actually quite reasonable, although I am more familiar with “fee-only" planners who charge by the hour (typically $150-$200 each hour). If you are comfortable with this CFP, then you can continue with him since his fees seem to be reasonable.
Avoid planner who do not charge fee. Someone has to pay. You will end up paying a lot more. But that is not the worst part. The worst part is they will steer you into products their companies sell, and some of the products generate more fee income for the salesmen than for you.
There are many “financial planners" or “financial advisors" running around since there is no restriction on who can call himself a financial advisor. But unfortunately many of them are actually insurance salesmen or stockbrokers. They may give you “free" consultation, but invariably they will try their best to steer you into products that would earn them commissions. While there is nothing wrong with earning a commission for works performed. But the potential conflict of interest is alarming. If the advisor is actually an insurance salesmen, you can bet that he is going to get you to invest via insurance products, many of which carry heavy sales commission, charges, fees, and long surrender charge periods. The advisors will not tell you other investment tools because there will be no commission in it for him. I think this is a lousy way to get financial advice, and I have seen many sad cases (I meet with about 15 families a week and I have seen enough problems).
The only kind of financial advisor I would recommend is “fee-only" advisors who would charge you by the hour. You are paying him on an hourly basis for his help and for his expertise. You are under no obligation to buy any financial product through him, and this is clear from the get go. So the advisor will help you review your portfolio, make asset allocation suggestions, and make investment suggestions. You would then take his advice and implement it yourself. This is the most objective and low-cost way of getting financial advice. Each year you would go back for a “check-up".
A good friend of mine (a CFP) do it this way: he provides tax preparation, financial planning (mainly “fee-only"), insurance and mortgage loan products and services so he is not restricted to just financial planning. As an independent he is doing quite well, but he needs to diversify into different areas in order to have multiple sources of income. Another CFP friend of mine was affiliated with an insurance company group for the past ten years and personally I do not think this is a good way to go because he has been pushing insurance products all these years (variable annuity, VUL, etc.) . I like the former approach better.
When seeking a financial planner, it is important to get one that will only provide your with advice for a fee, and not one who would try to sell you products so he can make commissions from you. Many financial planners or financial advisors are actually insurance salesmen or stockbrokers in disguise. They may tell you they can do your financial planning for you at no cost. But invariably they will try to steer you towards products which are loaded with sales charges and fees so they can get their commissions. Everyone needs to make a living, so I don’t blame them for wanting to make some money from you after giving you service. But what I worry about is the potential conflict of interest.
So the only kind of financial planner I would recommend is what is called “FEE ONLY", which means they provide you financial planning service at an hourly rate. You only hire them to give you advice. You do not need to go through them to buy any products (unless you really want to).
Another suggestion for you is to do as much homework and thinking yourselves before you meet with him. If you want to, you can run these issues by me on e-mail so we can have some discussions before you actually sit down with Danny. The idea here is even though you hire a financial planner, it is still your personal finances so you need to know as much as you can about how to handle your finances.