What’s in a Name

When people ask what I do for a living, I tell them I’m a CEO of a financial planning firm. I always give folks a minute to let that sink in. Afterwards, I let them know that I am an independent advisor and the title of CEO has to be on my registration with the state. In fact, all I had to do was spend $325 on LegalZoom for that title. Suddenly, being a CEO isn’t all that accomplished. 

Why do I tell people this? The reason is simple; an impressive sounding title is a sure way to grab attention. Everyone at a large bank will have the title of Vice President of something impressive. Graduate students at Harvard Business School can pad resumes with lofty titles for participating in student clubs. In author Philip Broughton’s book on the schools’ MBA program, he wrote that, “One day we, too, might be part of corporate America’s bulging vice-presidential class, so we may as well get used to the weightlessness of the title.” (1) 

I tell people that I’m a CEO because I want to start a conversation about what a title means. People need to understand this truth: for every qualified individual out there, there are ten more that will use a lofty title to take advantage of you. This conversation is especially important when it comes to trusting someone with your money.  

To start with, you have to understand that sales and marketing teams have consumers figured out. Back in 1966, psychiatrist Charles Hofling conducted an experiment that showed how persuasive a title can be. Hofling had fictitious doctors call prescriptions in for nurses to administer to their patients. The medicine was fake and was approved by the hospital. The dosage requested by the doctor was twice as high as the maximum daily dose stated on the prescription bottle. The fake doctor said that he would provide the required signature after he arrived at the hospital later that day.

Not one of the people working on the experiment predicted the results. A shocking 95% of these experienced nurses had to be stopped before they gave an overdose of medicine to a patient. The nurses simply heard the title ‘doctor’ and acted without thinking. The study concluded that the nurse’s high opinion of the medical profession was put ahead of good judgement. (2)  

It’s been fifty years since this experiment took place. Sales and marketing teams have had decades to build on this knowledge. When I worked at a large bank, everyone was a Vice President. The kid six months out of college. The former used car salesman. They would tell their clients that they were ‘Financial Advisors’.  Few people bothered to check their credentials.   

As a consumer, you need to understand the realities of Wall Street. It doesn’t take much to call yourself a financial advisor… the test takes about an hour and maybe two weeks’ worth of study to pass. To be a V.P., you just need to sell. Wall Street doesn’t train salesmen on investments or retirement planning; the focus is always on sales. Training is designed to take money from your pocket and move it into the banks.  Most salespeople are paid enough to not care what they are doing to people. Upton Sinclair said it best, “It’s difficult to get a man to understand something, when his salary depends on his not understanding it.”  

Now, as you can imagine, the person who I just struck up a conversation with is having some serious thoughts about who they’ve trusted their money with. It’s around this point in the conversation that I put them at ease. There are all sorts of people you can trust to do right. You just need to spend some time to understand who.

Pretty much everyone has heard of a Certified Public Accountant (CPA). A consumer knows that a CPA has been vetted and that a CPA needs to meet continuous education requirements. Luckily, the investment and advisory has similar standards you can trust. I am a Certified Financial Planner ™ (CFP®).  It took me three years of study to pass the six tests needed ahead of the 10 hour long comprehensive test. The pass rate for the test when I took the test was less than 60%… it’s not easy to earn the CFP® credential.  (3)

There are many other designations to look for when vetting an advisor. I also hold the Chartered Retirement Planning Counselor ℠(CRPC®) title. Other professional industry designations that you; it looks like alphabet soup after some advisor’s names. You shouldn’t worry when you see that. Since most designations require continuing education, a lot of advisors will choose to improve their skill set by tackling a new certification.  

I’m telling you the secrets of the industry because I cannot count the number of times a little effort would have prevented a huge mistake. Both your future and your finances are at stake. I hope this work can help point you to the right path. If you have any questions or comments, feel free to reach out to me.

(1) Broughton, P.D. (2008) Ahead of the Curve : Two Years at Harvard Business School. New York, NY : Penguin Press

(2) McLeod, S. A. (2008). Hofling Hospital Experiment. Retrieved from www.simplypsychology.org/hofling-obedience.html

(3) http://www.cfp.net/news-events/research-facts-figures/cfp-examination-statistics#1 

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