I wanted to articulate in broad terms what some of the designations that I carry at TAMMA mean and how those may impact those who choose to work with TAMMA. Not every financial advisor is a CFP® or RIA. And believe it or not, not all people in the financial industry are required to be a Fiduciary.
A certified financial planner refers to the certification owned and awarded by the Certified Financial Planner Board of Standards, Inc. The CFP® designation is awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements. Individuals desiring to become a CFP® professional must take extensive exams in the areas of financial planning, taxes, insurance, estate planning, and retirement.
The CFP® certification is a voluntary certification; no federal or state law or regulation requires financial planners to hold CFP® certification. It is recognized in the United States and a number of other countries for its (1) high standard of professional education; (2) stringent code of conduct and standards of practice; and (3) ethical requirements that govern professional engagements with clients.
Attaining the CFP® designation takes experience and a substantial amount of work. To attain the right to use the CFP® marks, an individual must satisfactorily fulfill the following requirements:
Individuals who become certified must complete the following ongoing education and ethics requirements in order to maintain the right to continue to use the CFP® marks:
A Registered Investment Advisor (RIA) is defined by The Investment Advisers Act of 1940 as a “person or firm that, for compensation, is engaged in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications.”
In general, investment advisors that have at least $25 million in assets under management or that provide advice to investment company clients are required to register with the SEC, while smaller advisors are required to register with state securities authorities. Registration of an investment advisor is not meant to denote any form of recommendation or endorsement by the SEC or state securities regulators. It simply means that the investment advisor has fulfilled all the requirements for registration as an investment advisor. In order to register with the SEC as an investment advisor, registrants must file Form ADV and keep it current by filing periodic amendments.
In translating fiduciary principles into application, an RIA is required to implement certain practices and procedures to ensure conformance to the law. At the heart of conformance is the registration form (ADV Parts I and II) that financial advisors must file with the SEC. It is ADV Part II; in which the advisor must disclose all material information a client needs in order to make an informed decision about the advisory relationship or a specific transaction. The information and disclosures required include:
This detailed information must then be compiled into a client brochure and written in clear language in a specified format, so investors may compare one firm to another as apples-to-apples.
Putting clients’ best interests first is something that I have and will always do regardless of proposed government regulations. Being a CFP® requires me to be a fiduciary when it comes to my interactions with clients. Components of being a Fiduciary include;
Financial institutions who may currently be holding or managing your assets, may not be fiduciaries because they were never required to be. This also means that they were never required to put your best interest first ahead of their own commissions, fees, or proprietary products that they may have sold to you.
To illustrate the difference between a fiduciary and a non-fiduciary consider the following; A non-fiduciary will sell you a dress or suit that fits you. A fiduciary such as TAMMA will find the dress or suit that not only fits you, but looks good on you a swell. This example demonstrates suitability vs. fiduciary.