What’s in a name? Not all terms, certifications are equal

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Juliet – yes, that Juliet – famously lamented:

What’s in a name? That which we call a rose
By any other name would smell as sweet;

“Montague” was a name Romeo had no choice in. He could have been a Smith, a Jones … an Eastman?! … and would still “smell as sweet.” Same nice guy. That’s what Juliet cared about. Names are only skin deep.

Approaching from a different side of the English language, we have the idiom “putting lipstick on a pig.” An ugly premise, no matter the window dressing, remains ugly. Spruce up that pig all you want. Heck, name him Romeo. He’s still a pig.

People have always tried to soften, disguise, or alter the truth via semantics, euphemisms and clever wordplay. But a rose is still a rose. We see that when we peel back subjective titles to reveal underlying facts.

We’re all smart enough to spot a swine in Sephora. But I have no idea how the layperson can decipher the wordplay used in my industry:

• Financial advisor
• Financial planner
• Wealth manager
• Investment manager
• Stockbroker
• Financial consultant
• Financial coach
• Retirement planner
• Fiduciary

…the list goes on.

And what about the alphabet soup of certifications? CFA, CFP, CPA, CIMA, CFS, CIC, CMT, etc. Some certifications signify hundreds of hours of dedicated study to hone an expertise. Others represent a pay-to-play 3-hour course culminating in a 30-minute quiz. Can you tell the difference?

Straight talkers, we’re told, will “say what they mean and mean what they say.” What does it mean when we have dozens of names for, supposedly, the same thing? What are we saying? I think it’s a bit confusing.

Last week I had three meetings with colleagues in the industry. On LinkedIn, all three list themselves as “financial advisors:”

• One focuses exclusively on investment management. He builds portfolios for clients.
• One sells insurance products. Whole life, indexed universal life, etc.
• One is a Certified Financial Planner (CFP), providing financial planning but no investment management.

To the layperson, each is a “financial advisor.” But to those in the know, these three professionals are completely different. Different services, different costs, and most importantly, different client outcomes.

It’s like saying both Michael Jordan and I are basketball players. It’s true, I swear! One of us had a solid intramural career at U of R’s Palestra gym. The other spent some time in Chicago. We’re the same, right?

Is this much ado about nothing? No! Because your money is in the balance.

How is the average Juliet supposed to decipher this financial jargon? I wish the industry would clean it up, but it won’t happen soon. Jargon serves to obfuscate the truth, assigning expertise where little exists. Pay no attention to the man behind the curtain, Dorothy. He’s a wizard, don’t you know? So, again, what’s the average person to do?

The Wall Street Journal’s Jason Zweig gave it his best shot. He wrote a popular article in 2017 detailing the 19 questions you should ask your financial advisor. As Zweig wrote:

“The obligation of those who give investment advice to serve clients, not themselves, is called fiduciary duty. That obligation is far from universal and, in some ways, is in retreat.”

In other words, it’s up to you to ensure your advisor works in your best interest. Zweig’s list is there to help you accomplish that mission. There really is a difference between the wheat and the chaff if you seek it out.

Zweig’s 19 questions contain a few major themes:

• Fees should be crystal clear to you as a client. Totally transparent.
• Fiduciary duty. Your advisor should be obligated – ethically and legally – to work in your best interests. It’s your money. You are hiring them. And yes, you should be asking yourself right now, “Wait…some advisors aren’t working in their clients’ best interests?!” Scary stuff.
• Referrals and bonuses. Any referral fees (e.g. to a mutual fund with a high commission, or to another professional who was paid to refer your business) need to be transparent and disclosed. Make sure you (and your money) are placed first and foremost.
• What are you paying for? Investment management? Comprehensive planning? A one-size-fits-all product wearing “investment lipstick”? There are many important financial services. Some professionals perform one, some many, and some none. We’ll come back to this idea.
• Investment philosophy. How will your money be invested and why? Ask for a track record.
• Team and credentials. A title – financial advisor, planner, coach, manager – doesn’t tell you much. But your professional or their team should strive for CFP, CFA, and CPA designations. As Zweig writes, “Many other financial certifications are marketing tools masquerading as fancy diplomas”

The various “financial services” you can receive are more diverse than the titles and certifications of those who provide them. You, the consumer, should know what you’re paying for. Let’s expand on that with a look at some common services:

• Most common, of course, is investment management. Many advisors build portfolios specific to their clients’ needs. Stocks, bonds, mutual funds, etc.
• Some provide retirement planning, going into detail about the client’s retirement, future income, future spending, and whether they can afford the life they desire. This planning can and should inform investment choices.
• Some advisors conduct tax planning, looking years ahead to minimize total tax bills. A penny saved is a penny earned, and a stitch in time saves nine.
• Some even provide estate planning, helping their clients plan a smooth transition of assets from one generation to the next. (scary stat: only ⅓ of Americans have an estate plan).
• 2022 reminds us the true cost of investing is psychological. Markets test our fortitude. Many advisors provide behavioral coaching – half financial expert, half therapist. The #1 source of portfolio underperformance is “voluntary investor behavior” – buying or selling at exactly the wrong times. A good advisor prevents that and reduces client stress along the way.
• And perhaps my favorite: ongoing financial education. Helping clients understand personal finance, investing, economics, etc. is a win-win for both parties. “An educated client is a great client.”

Some financial professionals provide all the above. At one point, “wealth management” denoted such holistic service. But as with the rest of the industry, the term “wealth manager” has been diluted. Some “wealth managers” remain holistic professionals and true roses. Others? Well…

As a consumer, you’ve got to fend for yourself. You’re looking for a rose. Not someone who titles themselves as a rose, but someone with the true attributes of a rose. Names and titles are only skin deep. It’s up to you to ask the right questions to know what you’re buying.

All’s well that ends well. But only if you ask the right questions. You need to play your part.

Jesse Cramer is a Relationship Manager at Cobblestone Capital Advisors and co-host of The Trusted Partner Podcast.