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Protecting Yourself From Fraudulent Financial Professionals

Whether they’re falsifying their credentials or sharing misleading information, it’s important to protect yourself from financial professionals by verifying their credibility.  

Recently, while reading a local magazine, I was struck by an advertisement from a financial professional. The advertisement described a practice that appeared to be focused primarily on insurance solutions, but the professional touted having a Ph.D. in Finance, which made me curious.

I dug a little deeper once I found the professional’s website, where she claimed to have a Ph.D. in Financial Services from The American College of Financial Services.

My suspicions grew, so I reached out to the director of the Ph.D. program at The American College of Financial Services where, full disclosure, I am an adjunct professor. He said he’d never heard of her.

Because that particular Ph.D. program is very small, with no more than two dozen or so students, this lack of awareness shocked me. Upon checking with the registrar, there was no record of her ever being in the program at all.

I eventually called her directly to confirm whether she did actually have a Ph.D. But shortly after my call, the biographical information on her website was changed. There was no more mention of the Ph.D. nor the MBA she had also mentioned. How many of her listed qualifications were lies?

Long story short, I had a caught a thief. Now, you might ask, what exactly did she steal? My answer: credibility.

Financial professionals spend hundreds, if not thousands, of hours educating themselves so that they can better assist their clients. Credibility is an invaluable asset that they earn during that process.

As the financial-services industry evolves into one focused on helping clients accomplish their financial goals, it’s important that financial professionals educate themselves about various topics and that their clients educate themselves on finding the right support for their needs.

If you’re, perhaps, searching for an advisor and want to avoid running into one with questionable credibility, or already have one whose credibility you’re questioning, here are some steps you can take.

Validate Relevant Designations Many people view the Certified Financial Planner designation as one of the most popular and relevant designations in the financial-services industry. I strongly recommend to anyone that will listen that if you're going to work with a financial advisor, at a minimum they should be a CFP professional. While I'm sure the vast majority of them who tout a given degree or designation actually have it, there are some who don't.

Finra maintains a website you can use to get more information on professional designations, where you can learn more about the respective designation or credential, as well as where you can check designation status online. I would highly recommend doing this before you start working with a financial professional.

Check the Record Next, you should double-check the professional's background using online tools like BrokerCheck, which provides a snapshot of an advisor's employment history, regulatory actions, and investment-related licensing information, as well as any complaints. You can also check the SEC's Investment Adviser Public Disclosures, state securities regulators, or state insurance regulators.

Do a Quick Search You never know what you'll find online. I'm personally a little wary of the reliability of online ratings, such as Google's, but it doesn't hurt to spend a few minutes searching for the individual to see what may turn up. In most cases it's probably not going to be all that much, but you never know!

So, what’s the next step with my situation? We’ll see. I know The American College of Financial Services is sending the financial advisor I mentioned a cease and desist letter so, in theory, she’ll stop touting the Ph.D.

I don’t plan on starting a new career actively searching out financial advisors who are falsifying their credentials, but I can tell you next time someone tells me they have a designation, I may look them up just to be sure!

Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. This commentary is provided for informational purposes only and is the proprietary material of Morningstar Investment Management. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar Investment Management, is prohibited. Morningstar Investment Management shall not be responsible for any decisions, damages, or other losses resulting from, or related to, the information, data, analyses, or opinions or their use. The opinions expressed are those of the author as of the current date; such opinions are subject to change without notice.

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About the Author

David Blanchett

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David M. Blanchett, Ph.D., CFA, CFP®, is head of retirement research for Morningstar’s Investment Management group. In this role, he works to enhance the group’s consulting and investment services. He conducts research primarily in the areas of financial and tax planning, annuities, and retirement plans. Blanchett also serves as the chairman of the Advice Methodologies subcommittee, which is the group responsible for developing and maintaining all methodologies relating to wealth forecasting, general financial planning, automated investment selection, and portfolio assignment for Investment Management. Before joining Morningstar in 2011, he was director of consulting and investment research for Unified Trust Company’s retirement plan consulting group.

Blanchett’s research has been published in a variety of academic and industry journals, such as Financial Analysts Journal, Journal of Financial Planning, The Journal of Portfolio Management, Journal of Retirement, and The Journal of Wealth Management. He has also been featured in a variety of media outlets and publications, including InvestmentNews, MarketWatch, Money, The New York Times, PLANSPONSOR, and The Wall Street Journal. His research has won a number of awards, most recently the Journal of Financial Planning’s 2014 and 2015 Montgomery-Warschauer Awards, the Financial Analysts Journal 2015 Graham & Dodd Scroll Award, and the CFP Board Center for Financial Planning 2017 Academic Research Colloquium Best Investments Paper Award.

In 2014, InvestmentNews included him in their inaugural 40 under 40 list as a “visionary” for the financial planning industry, and in 2014, Money named him one of the brightest minds in retirement planning. He is a RetireMentor for MarketWatch and an expert retirement panelist for The Wall Street Journal. Blanchett is also on the executive committee for the Defined Contribution Institutional Investment Association (DCIIA) and serves on the editorial boards of Morningstar Magazine and the Journal of Retirement.

Blanchett holds a bachelor’s degree in finance and economics from the University of Kentucky, a master’s degree in financial services from The American College, a master’s degree in business administration from the University of Chicago Booth School of Business, and a doctorate in personal financial planning from Texas Tech University. Blanchett holds the Chartered Financial Analyst®, Certified Financial Planner™, Chartered Life Underwriter (CLU®), Chartered Financial Consultant (ChFC), and Accredited Investment Fiduciary Analyst™ designations.

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