When attorneys and accountants have clients in need of expert investment assistance, they often have a list of advisors with whom they have a prior relationship. It is someone they have trusted with clients in the past, or have had some other type of working relationship that has worked well enough to want to continue a mutually beneficial coexistence.
Those professionals who cultivate professional relationships with advisors in order to assist their own clients with their financial and investment needs act as Gatekeepers, protecting their clients from poor or unscrupulous advisors.
Our new qualitative research allows these Gatekeepers to explain the choices they make regarding who they develop working relationships with.
In Gatekeepers: Their Influence on Referrals and Wealth Transfer, a list of criteria are included. Among that list is “advisor designations”, and for many Gatekeepers, those designations are meaningless.
“Attorneys and accountants are aware what kind of training is required for financial advisors to gain their professional designations,’’ said Spectrem president George H. Walper Jr. “But, because most financial advisors have identical designations, it is not the capital letters after their name that sway them to include advisors in their list of possible choices for their clients.”
The designations are many; the ones carrying the greatest weight are (CFA) Chartered Financial Analyst, CFP (Certified Financial Planner) and CIMA (Certified Investment Management Analyst). But the Gatekeepers view the designations as proof of expertise and training in the field of financial management, but not proof of honestly, trustworthiness, or attitudes towards clientele.
“It’s not as important to me,’’ said one Gatekeeper. “I don’t care about that stuff.”
The Gatekeepers are merely making recommendations, and often recommend more than one. The professional designations serve as a way to indicate to the Gatekeeper’s client that the advisor being recommended has done his homework
“People are impressed with designations even though many of (the clients) don’t really know what that means,’’ said one attorney.
Investors say they care about advisor designations, just as they say they care whether their advisor is a fiduciary. Seventy-five percent of Millionaire investors say it is important to them that their advisor have professional registrations or licenses.
Often, however, investors are unaware how difficult, or simple, it is for advisors to get their designations. The CFA, for instance, is difficult to attain initially and requires continued education to maintain.
Occasionally, the Gatekeepers are also unaware of the significance of the designations as well.
“I guess we should be a little bit skeptical,’’ said one accountant. “I don’t think the designation is anything but a formality. It’s good to have that formality and plenty of people have a designation but don’t seem to know how anything works.”
The other criteria Gatekeepers use to determine whether they are going to refer a financial advisor include fiduciary status, the size of the advisor’s firm (in relation to what the client would be comfortable with), and personality, of course.
“I always consider personality, because all of my clients have different personalities, as do I,’’ one attorney said. “If the client is more sarcastic, I try to match them with somebody who is more sarcastic. If they are straightforward, and want everything laid out to them, then I will get somebody who’s very straightforward.”