Entrepreneur Magazine recently ran an article reviewing and excerpting the book, “55 Surefire Home Based Businesses You Can Start for Under $5,000 by Entrepreneur Press & Cheryl Kimball (2009), which listed 55 businesses that people could jump into with little investment of time or money.  It was not surprising to find that becoming a Financial Planner was listed at number 15.15.FinancialPlanner

In truth of fact, with very little investment of time or energy, a person who may have been selling shoes yesterday could re-brand him or herself a “Financial Planner” tomorrow.  There are unlimited varieties of certification programs available, at a range of price, difficulty and duration, that will equip an individual—regardless of background—on how to advise others to create a financial plan.  More often than not, this training enables the “adviser” to earn commission money for selling a client a particular mutual fund from among the thousands of available mutual funds. The ability to earn the commission is what motivates most individuals to enter the business.

Luckily, there are a number of regulatory standards by which financial and investment advisors must conform and there is considerable competition and other general business skills that are necessary to succeed as a professional in the industry.  Nevertheless, any prospective client seeking to hire a financial professional will need to figure out on their own the caliber of experience and expertise the professional they are evaluating brings to the task.  For better or worse, there is no objective ranking or scoring mechanism to help distinguish:

  1. the individual who was an “A” student and excelled at math, got a Ph.D in Finance from a top university, then taught finance at a leading business school, then managed billions in institutional investment funds, learning both the equity and debt side, built investment porfolio construction experience that enabled him to help to engineer highly efficient investment management technologies for building diversified portfolios who then, seeing that most individuals weren’t getting good investment service, began to provide his institutional-caliber investment experience and industry innovations to help successful individuals receive the most academically-proven investment management protocols at a cost-effective price, from
  2. the individual who was a shoe salesman in his last job.

Additionally, it is almost impossible to rate such individuals on their investment performance or their costs, as the market changes all the time, the amount of risk and expenses contained within different portfolios vary enormously and SEC rules prevent the use of past experience as a predictor of future experience.

This is the reality of the investment world. In today’s market, glossy presentations often gloss over what can be huge deficits in fundamental expertise.  Thus, it remains the crucial responsibility of the each individual investor to affirmatively decide what level of expertise they are seeking and to be discerning about the experience and qualifications of the person they hire, including evaluating the skills, education, experience and approach to investing that that individual brings to the task.