Andrew Gluck

ContactAndrew Gluck is a veteran financial reporter and the founder and CEO of Advisor Products Inc., a marketing company serving 1,800 financial advisory firms.
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Ric Edelman, One Of Top Financial Advisors Of All-Time, Says He’s Been Alienated By The Financial Planning Association, Which Tells You Something's Very Wrong With The FPA edit
Sunday, July 01, 2012 11:36

Tags: advisor industry people | fiduciaries | financial planning | profession

Ric Edelman, one of the most successful and influential financial advisors in the nation, says he’s been alienated by the Financial Planning Association, the nation’s most influential professional membership group for financial advisors.

Speaking at a webinar last Friday, Edelman took a swipe at the FPA for not focusing enough on consumers. Asked why he has not tried to fix the FPA, Edelman unleashed:

 

“For three years, I tried to join the board of directors (of the FPA) and I was told very specifically, very clearly, that they would not allow me on the board for the sole reason that I do not hold the CFP,” Edelman said. “The FPA made a decision a number of years ago to align with the CFP and CFP Board, and made a distinction in their membership criteria that if you are not a CFP, you are not considered to be a financial advisor. You can be in the category of “other,” such as vendors and students and other people in the industry, but you are not a financial advisor, according to the FPA, if you are not a CFP licensee.”

 

“I hold six professional designations. I’m in the Financial Advisor Hall of Fame (by Research Magazine), ranked twice as the No. 1 financial advisor in the nation by Barron’s. I taught personal finance at Georgetown university for nine years, I’ve written seven books, two of which were named book of the year — one by the Institute for Financial Literacy — but according to the FPA, I am not a financial advisor,” said Edelman.

 

“Why should I be a member and pay dues to that organization,” he added.

 

 

Edelman’s rant is only one side of the story. The FPA is welcome to respond in comments or a guest post.

 

But there is no way to justify what the FPA has done to Edelman. He's a leader of the profession. How could the FP

 

With 17,000 clients and 300 employees, Edelman Financial Services manages $8 billion. Edelman, a former reporter, has strong opinions and a huge ego, which can easily rub people the wrong way. But he has succeeded in creating the largest independent financial planning firm in the nation serving the middle class. It’s a great achievement.

 

But what makes his alienation from the FPA all the more troubling is that, beyond financial success, Edelman brings revolutionary ideas to the profession.

 

As an example, Edelman offers perhaps the most insightful and compelling suggestion ever arrticulated for turning the financial advice business into a profession by holding himself, 80 advisors who work for him and other advisors to the same standard of care as doctors. 

 

Edelman has built his firm on the premise that his financial advisors owe clients the same duty as doctors owe patients.

 

Edelman Financial (EF) provides the same level of service to all it clients, whether they invest $5,000 (his firm’s new minimum investment as of October 2012) or $1 million.

 

Asked how he justifies giving the same level of service to a $1 million investor paying his firm $6000 a year as the investor paying $100 a year, Edelman said:

 

“Go to an emergency room and ask a physician how he justifies spending time with a patient who doesn’t have insurance and who can’t pay the bill, how he justifies the time he spends fixing his broken leg,” said Edelman. “Why are you putting this in the context of profitability? We’re talking about serving people who need our help.”

 

“We’re talking about helping Americans become financial successful, finically secure — getting their kids in college, retiring on their own, and caring for aging relatives for the good of our nation, Edelman added. “Why are you putting it in the context, ‘I’ll only do it if I can make a buck.’”

 

While the leadership of the FPA and other industry groups embrace a fiduciary standard and claim to represent the best interests of consumers and investors, Edelman’s built a publicly-held financial advice business based on the noble idea of service to consumers, and he’s serving the middle-class! While the FPA and other financial planning organizations claiming the high moral ground have created businesses serving "the 1%," Edelman has created a firm to serve anyone in need advice.

 

It’s tragic that the financial advisor arguably demonstrating perhaps the most serious commitment in the nation to professionaliism should feel alienated from the FPA and other leading groups representing the financial planning profession.

 

It indicates how provincial the FPA is. It does not see beyond the limited viewpoints of its leadership, which has long been dominated by a clique of liike-minded people.

 

For a maverick of the financial advice profession like Edelman, who has a history of success, to be turned away by the largest professional membership group in the nation for advisors tells you something is wrong with the FPA.

 

Here are some selected quotes from Edelman’s webinar on other topics:

 

On the responsibility of advisors:

“It takes a strong ego to tell a stranger who you just met what to do with their life savings. The only people with bigger egos than us are physicians. I can’t kill you. But I can make you wish you were dead. So it’s a pretty important responsibility that we have.”

 

On how the big ego needed to become an advisor can make advisors lose their way:

“We are not terribly self-aware. We think we are good at everything. I find advisors who think they’re the best stock pickers ever. They spend more time in front of a Bloomberg than they do with their clients. They spend more time writing a market update with their views of what’s going on in the world and their predictions of what[s going to happen next and they think they are better at this than the hundreds of thousands of other people doing this for a living as well. And that takes ego that turns into arrogance.

 

On the need to serve the next generation of financial advice professionals:

Two-thirds of advisors plan to retire in next 10 years and average age is 55. So we’ve been doing this a long time. And we’re the first generation of financial planners. We’re all ‘school of hard knocks’ kind of people. There were no college degrees for financial planning when we started in the ‘70s and ‘80s. We have an obligation to help the next generation in this field, to help them turn it from an industry into a profession.

 

On why the CFP Board, FPA, NAPFA and other industry groups are not on his list of groups advisors must serve:

The CFP Board, FPA, NAPFA do not appear on this list. They don’t matter. I loudly quit the FPA many years ago because I wasn’t satisfied with the approach they were taking to the field and I don’t see a huge amount to change my opinion today. Most of the industry is focused on the industry—how we could we make more money, how can we reduce our regulatory burden, how we can make our lives easier. There doesn’t seem to be much of a focus on our obligation to serve the community, employees, clients and the next generation. This kind of focus is why consumers don’t like our industry.

 

 

 

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Comments (12)

...
NYC
Big deal...the FPA has a set of standards that Edelman does not meet. He can chose to meet them - take the CFP exam, or pass on membership, but to call the FPA wrong is...well wrong.

Applying the same standards as the medical profession....Edelman would not be allowed to join the AMA (let alone serve on the board) without being a board certified physician....no matter how much he knows or who he taught.
NYC , July 02, 2012
...
hevensky
I'm not sure why Ric would want to be considered for the Board but I beleive he would be a most valuable member and should certainly be given fair consideration. As passionate as I am about the CFP mark, that is not why I became or remain a member of the FPA. I would like to know from the FPA if it is indeed policy to reject a potential practitoner member from Board service if he or she does not hold the mark.
hevensky , July 02, 2012
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brentb843
@ NYC - the FPA is not remotely similar to the AMA. The AMA has practice standards, ie, a standard of care when treating patients. The FPA has membership standards, so as long as you pay, you can use any hair brained Monte Carlo Simulation you like.

Edelman is NOT INDEPENDENT. EF has ownership in a broker-dealer. Through that relationship, EF is getting alot of undisclosed revenue.

Also, EF is publicly traded. How can Ric claim to be so client focused without exposing himself to shareholder liability?

The reason such hard question are important because absent truly auditing how his clients are performing relative to their goals, its all just rhetoric.

Great guy, but he looks awful similar to a broker dealer.
brentb843 , July 02, 2012
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bramsay
Hear hear to much of what Ric says about how we should be more professional.

I agree that the FPA has problems, but I think a good bit of it is the problem of trying to shift focus from sales culture to the kind of profession that Ric describes. When you have a lot of salespeople as members and a lot of revenue generation from product vendors, it makes it very tough to change.

I believe making CFP the standard is an attempt at change, though I don't believe it really gets at the biggest problem which is the conflicts of interest that occur with the extremely large disparity in compensation due to commissions.

All that being said, in this article

http://www.ricedelman.com/cs/education/article?articleId=2432&titleParam=What Exactly Does That Designation Designate?

Ric pontificates about the alphabet soup that exists with professional designations, going so far as saying they don't use designations on their letterhead or business cards.

How does his position get us closer to having more qualified advisors, and the public being able to tell who is qualified and who is not? What does he propose? What does he suggest a recent college grad should do if they want to be an advisor?

If Ric is really interested in trying to effect change at the FPA, why hasn't he challenged and taken the CFP exam- I bet he could pass it without even studying.
bramsay , July 02, 2012
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paulp603
There are reasons not to belong to the FPA however,not having the self-centered, larger than life, almighty Ric Alderman not having the FPA accept his generous offer of becoming a Board of Directors member is hardly one of them....how about taking the CRP Ric and respecting the qualification....you didn't just want to be a member of the FPA....you wanted to sit on the Board....and because they didn't kiss you "okole" (Hawiian)you were offended.........too busy marketing your empire......how disappointed was I (30 years experience)when I attended the ETF conference in Hollywood Florida in January and looking forward to hearing this "guru" found his 30 minute presentation nothing more than a sales pitch indicating the demise of the small firm and we should just all run and join his empire......nearly made me vomit listening to his self promotion. He doesn't manage assets......he sells pre-packaged investment program and asset allocation programs.....check out his website and you'll see he's nothing more than a broker/dealer masquerading as a Financial Advisor who adhers to a Fiduciary standard.....
Salem, NH....7/2/12
He puts an ad in the paper, swoops into town, sets up seminars and because of his Oprah exposure, people assume he's competent...check it out yourself.....sadly, I was hoping for more......clearly, I wouldn't align myself to this individual regardless of outcome.....he'll get exposed one day......
paulp603 , July 02, 2012
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brentb843
@bramsay - Does the CFP people allow you to now just sit for the exam? I believe they still require the study courses (revenue) prior to taking the test. Funny, you are not required to study for the CFA exams.

brentb843 , July 02, 2012
...
JakePlanner
Focus on what Ric says about the industry, and the consumer, not about his business or ours. (He's probably not right that all consumers will want to go to a giant non local RIA, but he's right and thought-provoking about other things.)

Andy, it would be great to have Ric do two webinars per year, and to be as controversial as he wants to be. Even if you don't agree with Ric (or Andy or anyone else), there is no denying that Ric makes you think. Our industry needs that, and I applaud those who make us think, yes including Andy Gluck. (Even when he buys into fear a bit too much.)

I do refuse to buy into the media based fear and negativity, and I think Ric's point about the media negativity is something we should all work to change - the sky's not falling, get on with your work, model for your clients How To Enjoy Life. (Ain't that what it's all about?)

Have more of these "Free thinkers, big ego, outside the box" types in your webinars Andy, please.
We are a newish profession and we need to set ourselves up so consumers don't fear us - after all, independent RIAs need to be distinct from Wall (Fear) Street giants.

In fact, Ric's next presentation might be:
"How I Motivate Potential Clients to Stop Delaying and Being Scared and to Trust My Firm, Even Though they never meet Ric".
Thank you.

JakePlanner , July 02, 2012
...
pauslander
While FPA won’t reveal specific discussions around board candidates, Mr. Edelman’s statement that you must be a CFP to be a FPA board member is 100% false. Indeed, three current FPA national board members do not have CFP designations and this has also been the case with past board rosters which regularly include individuals who do not hold the mark. Our bylaws do state that 75% of our national board must hold a CFP mark so if a candidate applied during a cycle where we had 25% of our roster that did not hold the mark, we would not be able to consider additional non-CFPs accordingly for the open positions.

Mr. Edelman’s statement that FPA doesn’t recognize a financial adviser if she/he doesn't hold the CFP mark is also puzzling. We have several thousand members who do not hold the CFP mark and serve the financial planning profession in a variety of advisory or investment management capacities. We have repeatedly stated that many of those within financial services and allied industries are vital to supporting the overall financial planning profession and I/we would ask him to provide a single example of FPA stating you must be a CFP to be considered a financial adviser.

In terms of his comment that we don’t focus enough on consumers, we are a professional membership organization first. However, we have clearly been able to make a significant mark in consumer education that is extremely evident in numerous pro bono and consumer initiatives we conduct (80+ percent of our chapters work with us on some type of consumer outreach program); partnerships which find ways to advance financial planning in the public (AARP, NAACP, military groups, national business associations, health care organizations, etc.); and educational tools, resources, Planner Q&A and tips, columns and more on FPAnet.org, which numbers in the tens of thousands of unique visitors each month. We must be doing something right in educating consumers as we continue to be recognized as a trusted consumer source by outlets such TIME magazine, CNBC, USA Today and U.S. News and World Report in just the past few months alone.

The “facts” that Mr. Edelman states do not pan out and are easily refutable. And, if he has other concerns, I/we’d welcome hearing from him directly.

Paul H. Auslander, CFPR, 2012 President, Financial Planning Association
pauslander , July 02, 2012
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brentb843
@ Paul Auslander - I disagree. I believe it is because of marketing. I would love to see financial planning regulated. You state you are a membership organization, then it should be the financial planner association, correct?

I have tried for almost 4 years to contact folks at your organization and others to provide standards on such calculations as Monte Carlo Simulation. No reply.

Please see link and fee free to respond.http://www.carolopolis.com/assets/Uploads/FPC-to-Dodd.pdf
brentb843 , July 03, 2012
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bramsay
@brentb843 The CFP board allows certain individuals to challenge- they are requirements, like CPAs, CFAs, PhD's in economics etc. Its a reasonable allowance, and Edelman qualifies, so I'm still surprised he hasn't just taken the exam.

Andy, if you get the chance to ask Ric the questions I have, I'd like to hear about his thoughts on what might be better than coalescing around a single financial planning standard.

Edelman's success appears to be warranted. His fee structure might be a bit high, but performance looks like it has been good.

I'm pretty sure he ditched the BD last year. And Edelman Financial is no longer a public company. Though my opinion is that outside owners- either public or private, are a bad idea.

Three of our most highly regarded fund managers are Dodge and Cox, American Funds and PrimeCap. All are employee owned. Outside owners create pressure which can compromise the integrity of the fiduciary relationship with clients. We are both a profession and a business, but outside owners tilt the structure more towards business than profession.

bramsay , July 03, 2012
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brentb843
@ bramsay - cool, I may just challenge and sit for it and report back. I also agree outside ownership is bad. Law firms do not allow it and some states CPA firms cannot be owned by others as well. (He website looks like still has a piece of a b/d and is publicly traded!)

Also - are you suggesting mutual fund companies just see us as distributors? (sarcasm intended)
brentb843 , July 05, 2012
...
Richard C. Salmen
Having spent five years on the Financial Planning Assocaion (FPA) national board of directors (2006 - 2010) I find Mr. Edelman's rant both interesting and disturbing.

Specifically, I served on the FPA national board nominating committee three times (2006, 2008 and chaired it in 2010). So, when I speak on this issue it is from the perspective of one who was there partcipating and ultimately leading the process.

Since Mr. Edelman was not a nominee during the years I served I am assuming he applied for service on the FPA national board before 2006. I can and do state emphatically that his assertion that you cannot be considered for a position on the board if you are not a CFP professional was NOT the case during my tenure on the FPA board. Not only did we consider non CFP professional members for the FPA board we elected them to those positions. FPA did (and I believe still does) have a requirement that 75% of board members hold the CFP professional certification. I am not going to list the names of those non CFP professionals I served with on the FPA board during my five years of service but it would not be a difficult fact check.

While Mr. Edelman's take on the FPA board selection process was interesting, his belief that FPA does not consider or support consumers is disturbing. During my FPA board tenure the FPA web site was completely rebuilt so as to serve both financial planning practitions AND consumers. A complete consumer portal was built and is still in use today. All you have to do is go to www.fpanet.org and see the two tabs at the top of the website: comsumers and financial professionals. On top of that, the consumer page is the default that comes up first!

During 2009 and 2010 I participated with FPA CEO Marv Tuttle in developing a relationship with the national council of Mayors that resulted in financial planning clinics for the public at cities all over the United States in 2010.

These are only two of many examples that anyone who cares to do the research can find. While it makes headlines to sensationalize without the proper facts and information it does not serve the public, the financial planning profession or the consumer in a good way.
Richard C. Salmen , July 12, 2012

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