Is Your Adviser Pumping Up His Credentials?

scam financial-advisor

Similarly, the registered financial consultant designation, granted by the International Association of Registered Financial Consultants, requires four years of previous industry experience, a degree in finance or one of several professional designations, and no suspensions or revocations of professional licenses. There is an open-book, online exam, says Edwin Morrow, chairman of the IARFC.

Other requirements: a $45 application fee and a $150 annual membership fee. Among the “valuable IARFC member benefits” the organization offers, according to an invoice obtained by the Journal, are “marketing and image brochures,” “impressive professional certificates” and “RFC image jewelry.”

“They cannot obtain the jewelry or brochures unless they’ve gone through the membership process,” says Mr. Morrow.

Credentials can help advisers make more money. A 2007 study by Finra’s educational foundation determined that 46% of older investors were more likely to accept financial guidance from someone with a professional designation—and 17% of investors would be more receptive to advice from a “certified adviser for senior investing,” even though such a credential doesn’t exist.

A 2009 survey commissioned by the Million Dollar Round Table, a trade association of financial advisers, found that insurance agents and advisers who market themselves as “experts” report 40% more in annual revenues, $590,000 versus $420,000.

Matt Thornhill, founder and president of the Boomer Project, the market-research firm that conducted the survey, presented the findings to an audience of advisers in February 2009. “Maybe getting that extra couple of letters after your name is a pretty good idea,” he told them, “because it leads to a path that looks like it has more revenue.”

Mr. Thornhill now says his comment was directed only at “legitimate” credentials. “I’m in no way promoting just getting some set of random letters behind your name.”

One purveyor of financial designations, the AAFM, may be padding its own credentials by claiming relationships with industry luminaries and groups that they say don’t exist.

The AAFM’s website features a “Global Board of Academic Advisors & Professors.” The board members, says the AAFM’s Mr. Mentz, have “received faculty awards and agreed to be faculty advisers. If they don’t want that anymore, they’re free to contact me.”

One such “adviser,” Campbell Harvey, is a finance professor at Duke University. Contacted by the Journal, he stated by e-mail that “I have never advised them on anything” and “did not agree to be an adviser.”

Another, Jacob Gold, is a financial planner in Scottsdale, Ariz., who says he once held a designation from AAFM but “years ago” let it lapse. “I did not know I was an ‘honorary adviser,’ nor do I know what that means,” he says. “In no shape or way do I have an advisory relationship with them.”

The AAFM members’ handbook, available on its website, states that AAFM has a “trademark agreement” with the CFP Board and the CFA Institute in which “AAFM has special rights to the MFP Master Financial Professional trademark and licensing around the world.”