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 Hot

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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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