Earl Jones isn’t one of you

Calling the man an advisor is like calling a mugger a funds transfer specialist, or the guy who knifes you a surgeon.

No, he’s not an advisor: Except that the rules allowed him to say he was.

I’ve been talking to advisors since the story broke. There’s universal anger that Jones got away with placing himself in their peer group. You should rightly consider his characterization by the media as a financial advisor or planner to be a slap in the face.

It demeans the time you spend gaining credentials, and then going through continuing education courses to stay current with the latest strategies to build and protect client wealth.

The so-called shingle theory is too permissive. The shingle’s cracked. And we should all aspire to a future where some kind of mechanism stands in the way of people misrepresenting themselves. Anything less adds insult to the injury that’s already been done to advisors’ training, registration status, and professionalism.

It’s frustrating that the regulators that sometimes pester you weren’t able to catch Jones or monitor his activities — although this would have been impossible since he was never registered to transact investments business in the first place. And by all accounts never placed a trade.

Scandals like these hurt independent financial planners. They create a tricky dynamic for current clients, as well as prospects, by making them suspicious — and they indirectly benefit the banks as some consumers flee to the perceived security of large institutions with recognizable names.

To combat these suspicions, advisors need to put their best feet forward. Show the trophy case. Sit down with clients and explain how you’re registered, how you’re credentialed, who your dealer is, who your MGA is, and how audit trails and compliance regimens come into play to ensure you transact business correctly, and on the client’s behalf.

Step up efforts to show how you’re different. Start by making changes to your brochures and other collateral you give to clients. The first order of business should be to add the logos of your credentialing organizations, CFP, RFP and all the rest, with short text explanations of what those designations mean.

Further, call clients in to meetings and have a sit down to walk them through the basics of where all their funds are placed. Show them transactional records, and encourage them to ask questions with an eye toward shoring up trust before eroding suspicions can take hold.

No doubt you’re also bitter about reports that Jones gained the bulk of his clients through referrals. So get prepared to talk to clients about basic financial literacy issues. And start these conversations by reinforcing the idea that if clients hear about returns that sound too good to be true, then they probably are.

Even the old Fair Dealing Model can come into play, since it serves as a primer to walk clients through the basics of how an advisor/client relationship is set up, and how a true fiduciary can be expected to interact with clients. While it’s true the model was never adopted, the best advisors were already practicing most of what it preached. Now’s a good time to show that off.

In times like these, advisors can serve themselves well by educating their public. Scandals make them wonder what it is you do for them. Don’t be afraid to make it clear.

Sure, there’s nothing more aggravating than to have to engage in damage control, when you yourself have done no damage.

But if you and your peers actively display your credentials, and call for codified professional standards, then you can create a future in which someone like Earl Jones would never dare to try and call himself an advisor.

(07/17/09)