Planners' conference falls short on ethics

All the right things were said at this year's convention of the Financial Planning Association. But the FPA glossed over the most important ethical issue.

By The Mole, Money Magazine's undercover financial planner

SEATTLE (Money Magazine) -- The Financial Planning Association missed a golden opportunity to address inherent ethical conflicts between planners and their clients at its annual convention that kicked off in Seattle this weekend.

Planners' fiduciary duty dictates that we must put the best interests of you, our client, ahead of our own.

The Mole is a certified financial planner and certified public accountant who, in the interest of fairness, thinks you should know what goes on behind the scenes. Have a topic you'd like him to write about? E-mail

On that point, FPA president, Nicholas Nicolette, said all the right things. This duty to our client is "unambiguous and without exception," Nicolette said in his kick-off address.

The irony was that I had just come from a pre-conference session on "ethics." It was entertaining, with a talk by one former planner who had done time for securities fraud. "Don't do what I did" was the message.

But the session didn't even touch on the dilemma we financial planners face every day in the pursuit of putting our clients' interests first versus how we make our money. There are plenty of unethical practices that fall well short of outright fraud. It's legal for me to sell you a variable annuity for your IRA - but that doesn't make it right.

After the presentation, I wandered into the exhibit hall for a little food and drink. Walking past some of the booths, I was pleased to see many financial institutions that preach low-cost, long-term investing represented.

Unfortunately, there was a greater representation of institutions that deliver sub-par performance along with high sales fees - these funds are not so good for the consumer, but can pay handsomely to us financial planners.

In spite of the idealized view we planners have of our profession and our duty to the consumer, there are inherent conflicts. We want to do well for you but we also want to build wealth for ourselves. To pretend these conflicts don't exist may well condemn financial planning to that of a sales occupation.

Whenever you buy financial services or any financial product, always understand what's in it for the person and organization selling it to you. If they constantly beat the drum of fiduciary responsibility and your needs above theirs, make sure they mean it - or put on your walking shoes.

More from the Mole in Money Magazine:

Financial advice: Get it in writing: When making investment decisions, believe what your adviser writes, not what he speaks.

The wrong kind of advice: When your planner steers you toward expensive investments, stop and ask the right questions.

Why 'trust me' makes me nervous: Planners try to make money for clients, but also for themselves. Anyone who says otherwise is trouble.

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