News and Updates

News and Updates

Merely self-study professionalism
Time for financial advisors to become real professionals

John De Goey
Financial Post

November 23, 2004

Have you ever seen ads that suggest you can take a college-level course and then become a "professional" bartender in six short weeks? Most people who see these late-night TV spots size up the promotion as: "Gee, I never knew bartending was a bona fide profession," or "What do they teach those people after the second week -- how to cross-sell for bigger tips?"

There are many lines of work that want the prestige of being a "profession." There are professional bricklayers, professional real estate agents and professional children's entertainers. It seems everyone who wants to be a professional merely needs to say they are a professional and, voila!, they are. If only it were that easy. Some of the most conspicuous pretenders for the right to use the "P" word are financial advisors.

Virtually all advisors tell whomever they can get to listen that they are "professionals." It's obvious they want the public to think of them that way, but is this self-professed, industry-wide positioning warranted? Do advisors deserve to refer to themselves as professionals?

I say no. Not yet. There seems to be a consensus that we are finally taking real steps toward turning the business of offering financial advice into a real profession. Today, the attributes of professionalism are attained on a self-select basis. Those who want to do the right things do them -- and good for them. The problem is the majority of advisors don't care about doing the right things and no one is making them do them. This presents a major problem for consumers -- how to differentiate truly professional advisors and the late-night, bargain-basement pretenders.

The more established professions -- the doctors, dentists, lawyers and accountants -- didn't get to call themselves professionals just by taking some course they heard about after Jay Leno signed off for the night. Real professionals have to pass a series of rigorous, graduate-level courses that demonstrate a capacity to apply highly specialized knowledge. As a rule, highly qualified practitioner instructors, who are well versed in the nuances of the field, lead in the teaching of this course work, often at a university. The status of a profession is often augmented by years of internship and peer review. It would be preposterous to get a degree in medicine through correspondence.

When I began my career in the financial services industry, I asked a wide variety of people in the business how to get started. The prevailing view was to stop talking about getting started and "just do it." I was advised to sign up for the self-study course on mutual funds, write the exam and get a licencing sponsor. I did this and, voila, I was a professional! More accurately, I was allowed to sell mutual funds, which is different from offering financial advice, long before I had attained any designations. If professional conduct is about qualified advice and specialized knowledge, why do we grant people licences to sell products before they get the knowledge to support their recommendations? Talk about putting the cart before the horse.

In the years after being licensed to sell mutual funds, I got a licence to sell stocks and bonds, as well as a licence to sell life and disability insurance. I also attained a number of designations. Within a few years, I was a Certified Investment Manager (CIM), a Fellow of the Canadian Securities Institute (FCSI), a Certified Financial Planner (CFP) and a Registered Financial Planner (RFP). Most people now offering advice don't have any of these or other designations. That's a problem. If a consumer needs legal advice, she will know enough to look for someone with a law degree. If that she needed medical advice, the letters M.D. would appear after the name of the person from whom she sought advice. If that same person wants financial advice, what designations should she look for? In fact, would she look for a designation at all?

Any industry that can't even agree among its own practitioners what is required to be a practising professional clearly hasn't made the full transition to a real profession. It's time we took those final steps. Most financial advisors today have no designations; any industry that has most of its practitioners calling themselves professionals after passing one correspondence course that a reasonably intelligent individual could pass is surely not a real profession. Until our advisors are sufficiently prepared to live up to their self-proclaimed status, consumers will be taking a huge risk when working with most advisors. Besides, we wouldn't want to disparage all those professional bartenders out there, would we?