Is Your Bank Financial Advisor Really An "Expert"?

The bank financial advisor is a professional who provides guidance and expert advice to their clients. As a bank financial advisor, this individual is typically an employee or sub-contractor to the bank and has access to the bank’s customers.  This provides a way to further meet the financial needs of the bank’s customers through the offer of additional products and services.

When considering the question of whether or not a bank financial advisor is an expert or not, several questions should be asked.  Understanding the individual advisor’s area of expertise in the area of financial planning and/or investment management, as well as their licensing, experience and education are important.  It is also important to know how the advisor is compensated and whether or not they receive more of an incentive to sell bank products over other product offerings.

Basic Qualifications and Licenses

A person who holds themselves out to the public as being a financial advisor is required to be registered and licensed, on either a Federal or state level. This requirement ensures that the advisor meet a certain core set of qualifications before engaging the public in any planning activities or investment advice, regardless of whether or not a fee is charged.

The basic license requirement is the Series 65 Uniform Investment Advisor Law Exam that provides a standard of knowledge a perspective advisor must know.  This license is typically required in each state that the advisor performs an advisory practice and must be obtained before engaging a client.
The advisor should also have a Certified Financial Planner (CFP) designation but may also be a qualified estate attorney or Certified Public Accountant (CPA).  These additional professional licensures or qualifications are not required but do enhance the standing of the advisor.

Areas of Expertise

The most common area of expertise that the advisor has is in the area of financial management, savings and investing. The advisor role is that of quarterback, working on a plan with the client to determine where best to go. The advisor should provide advice that is independent of any product advice or service for which they may receive additional compensation.

Compensation and Conflicts of Interest

On the question of compensation, there is a natural tension that exists between the role of the advisor as an independent voice who helps their client clarify and prioritize their financial plan, and the bank employee who needs to generate fee income for the bank. This creates a perceived conflict of interest and although not illegal, must be fully disclosed in the discourse document or brochure you receive at the initial client engagement.

Asking questions of your advisor and seeking verification of their licensing and approach to planning will serve your interests and answer any concerns you may have about their level of expertise. Regardless of whether or not the advisor works in a bank lobby or in a Main Street office, the point is that the requirements to be a financial advisor are the same for all practitioners and should be easy to verify upon request.

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