What It Means To Be A PALADIN 5-Star Advisor

Transcription

1 What It Means To Be A PALADIN 5-Star Advisor

2 When is an Advisor not an Advisor? A small percentage of financial professionals have spent years acquiring the knowledge they need to help their clients achieve their financial goals. A much higher percentage of advisors have acquired sales skills that they use to market investment products. The difference between the two types of advisors is like night and day. Introduction Advisors aren t advisors when they are sales representatives. More than 80% of all advisors sell financial products for commissions. Like any other sales professional, their job is to convince investors to buy the products they re selling. Whether or not investors achieve their financial goals is secondary to the advisors needs to meet sales goals and maximize personal incomes. Unfortunately, these advisors do not describe their roles as sales representatives to investors. They know that would be counter-productive. Instead, they camouflage their role by describing themselves as financial experts. This creates a substantial amount of hidden risk for investors who have to determine who the real professionals are experts who have the knowledge to help them achieve their goals or sales reps who want to sell them investment products. Following are brief descriptions of the tactics most sales representatives use to win investor assets. Investors can use the information in this white paper to avoid sales representatives who market themselves as experts. Personalities & Sales Skills Most lower quality advisors use their personalities and sales skills to convince investors they are trustworthy experts. However, they don t provide any documentation to prove they are the competent, ethical professionals they say they are. It s too bad personalities and sales skills have nothing to do with competence and integrity. The Sales Pitch Lower quality advisors prefer verbal presentations that give them maximum flexibility to use their personalities and sales skills to win assets. They may provide glossy brochures and pamphlets for hot investment products, but they provide no documentation for their credentials or business practices. Omissions, Misrepresentations, and Diversions Low quality advisors omit or misrepresent information that could cost them sales. For example, they omit information about their credentials and misrepresent their expertise.

3 Another favorite tactic is to divert attention away from their qualifications by selling the track records of hot financial products. Loss of Deniability Weak advisors always prefer verbal information because omissions, misrepresentations, and diversions are easy to deny later. It s the investors word against theirs. Written information is much more difficult to deny, especially if it s certified by advisors that it s complete and accurate. Loss of Control Weak advisors also prefer verbal information because they lose control over data that are documented. For example, investors may turn their written information over to supervisors, compliance officers, regulators, or attorneys. Comparative Data Weak advisors prefer verbal presentations for an additional reason. Each sales pitch is different so it s difficult for investors to compare advisors to each other. Documented, standardized information makes it easy for investors to compare advisors to each other and difficult for lower quality advisors to compete with higher quality professionals. Bad advisors don t want to be compared to good advisors because they will lose every time. Jack Waymire is the Founder of the Paladin Registry and the Author of the highly acclaimed Who s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.

4 Undocumented Advisors Create Additional Risk Lower quality advisors hide information from investors because exposure costs them sales. Higher quality advisors volunteer information because they are proud of their accomplishments and have nothing to hide. Introduction Investors biggest risk isn t the stock market, its bad advice when they invest in the stock market. An example of this risk occurred in when millions of investors lost over 50% of their assets. Bad advice is a hidden risk that makes the selection of the right advisor the most important decision investors will make for their assets. There s a lot at stake including standards of living and financial security during retirement. Given the importance of this decision, what are some of the hidden risks that investors are exposed to when they select undocumented advisors? What Documentation? Investors select advisors for their knowledge because they believe competency will help them achieve their financial goals. But, what if the advisors aren t really as competent and trustworthy as they say they are? The only way to find out for sure is to review information that documents their expertise, ethics, and business practices. For example, their education, experience, certifications, licensing, compensation, and compliance records. Lack of Knowledge Competent advisors have spent years acquiring financial knowledge in college, in certification programs, and in associations that require continuing education. Then they have spent additional years acquiring experience by helping investors achieve their financial goals. Competent advisors who have spent years acquiring knowledge are willing to document their achievements for investors. Advisors with limited education and experience go to great lengths to hide this information from investors. Lack of Integrity Like competency, advisors with clean compliance records are more than willing to document the facts. Advisors with bad compliance records go to great lengths to hide the facts from investors. It s unfortunate, but there s no regulation that says this information has to be disclosed. This lack of regulation transfers all of the risk to investors.

5 Bad Results Bad advice produces bad results two ways: Investors make less money than they should in rising markets. For example, the market is up 16% and their assets are up 12%. Investors lose more money than they should in falling markets. For example, the market is down 20% and their assets are down 24%. Most investors don t put enough importance on the huge impact of small performance differences when they are compounded over long time periods. For example, if an investor started with $100,000, didn t add another dollar, and invested it for 25 years, different rates of return would produce the following asset amounts: A 4% average return would produce $266,584 A 8% average return would produce $684, 848 A 12% average return would produce $1,700,006 Lagging by 4% in a rising market or losing 4% more than necessary in a down market doesn t sound like much. But, compound the differences over longer time periods and a very different picture emerges. The hidden cost of bad advice could be more than $1 million. Increased Financial Risk Under-performance is one result of bad advice. Another is excess risk. Because lower quality advisors lack competence and frequently sell hot investment products, investor assets are exposed to much higher levels of risk. The risk manifests itself in unnecessary losses that undermine the achievement of long-term financial goals. This Risk Lasts for Years It can be years before investors realize they have been receiving low quality advice. Then it can take additional years to dig their way out of the hole that was produced by bad advice. For example, if investors started with $100,000 and their assets declined to $50,000, they are down 50%. However, it takes a 100% (double their assets) return to get back to $100,000. That 100% return produces a zero rate of return for the time period and may take years to achieve. Jack Waymire is the Founder of the Paladin Registry and the Author of the highly acclaimed book Who s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.

6 Undocumented Financial Professionals Frequently Asked Questions Investors biggest financial risk isn t the stock market, it s bad advice when they invest in the stock market. Low quality advisors give bad advice, therefore they are a major source of risk to investors. Why should advisors document their credentials? Advisors want investors to trust them and follow their financial recommendations for important assets, like those that are being accumulated or preserved for retirement. Trust should be based on factual information that proves advisors really are the competent, trustworthy professionals they say they are. Why do most advisors hide credentials? Low quality advisors don t provide documentation for one basic reason. They know they can t win investor assets if they document bad credentials and business practices. And, if they can t win investor assets, they can t make any money. Their only solution is to hide the information and hope investors don t ask for it. How do advisors hide weak credentials? Advisors use three primary tactics to hide weak credentials: omission, misrepresentation, and diversion. Omission is what they don t say about themselves, for example they don t disclose their lack of education or experience. Misrepresentation is what they do say that isn t true. For example, they describe themselves as investment experts even though they lack sufficient knowledge to make that claim. Diversion occurs when they focus investor attention on hot investment products instead of their credentials. What credentials are hidden? Financial advisors have a least 20 key credentials that impact their competency, integrity, and business practices. Some of the more important ones are: education, certifications, experience, compliance records, conflicts of interest, RIA/fiduciary statuses, methods of compensation and wealth management services. How do undocumented advisors compete for investor assets? Advisors with bad credentials compete with their personalities and sales skills. That s why so many investors like their advisors, but rarely do they have documentation for their credentials, ethics, and business practices. Plus, these advisors frequently use the same three step sales process. Step one is to get investors to like them, step two is to

7 convert rapport into trust, and step three is to sell the investment products that make them the most money. How does documentation protect investor assets? Verbal information is too easy to manipulate. Therefore, documented professionals are safer choices than advisors who don t or won t document their credentials and business practices. Investors don t have to know what the advisors are hiding or why. Investors just have to know hidden information represents additional risk that must be avoided. Jack Waymire is the Founder of the Paladin Registry and the Author of the highly acclaimed book Who s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.

8 Why Select a Paladin Registry Professional? Registry professionals are advisors who document the credentials and business practices that impact competence and integrity. They volunteer this critical information, so investors can make safer advisor selection decisions. Introduction Investors have a choice when they select financial professionals to help them achieve their goals: they can select documented or undocumented advisors. The Paladin Registry is the only service that is comprised of professionals who voluntarily disclose all of the information investors need to select competent, trustworthy advisors to help them achieve their financial goals. Stop the Merry-Go-Round Some investors have already terminated two or three previous advisors. They probably know by now that changing advisors every few years is an expensive, counter-productive process. Instead, investors should change the way they select advisors by requiring documentation for claims that advisors make about themselves and their services. The easiest way to get off the Merry-Go-Round is for them to use the documentation in the Paladin Registry to select their next advisor. Safer Decisions Investors make better decisions when they hire professionals who are willing to document credentials, ethics, and business practices. Investors have the facts they need to make informed decisions. Plus, they aren t prone to hire advisors for their personalities and sales skills. They select real experts who can help them achieve their financial goals. Track Records vs Credentials Advisors don t have track records that document their historical results. Instead, they compete with their credentials, business practices, and services. Registry professionals volunteer the following data so investors can make informed decisions. Credentials: Experience, education, certifications, licensing, compliance record Business Practices: Services, compensation, communications, custodian Conflicts of Interest: Investment recommendations, compensation, expenses Reduced Risk of Bad Advice The Registry s high minimum standards and comprehensive due diligence requirements reduce investors risk of selecting bad advisors based on their lack of credentials, ethics,

9 and anti-investor business practices. Paladin only admits advisors who achieve a minimum rating of three stars. Sophisticated Wealth Management Services Once investors have selected financial advisors, their results will be determined by the knowledge of the individual and the sophistication of his or her services. If investors select sales representatives, they will end-up buying investment products that pay big commissions to advisors. Plus, they get unsophisticated financial services that undermine the achievement of their financial goals. Advisors in the Registry provide sophisticated planning, advisory, and management services that increase the probability that investors will achieve important goals like comfortable, secure retirements. Jack Waymire is the Founder of the Paladin Registry and the Author of the highly acclaimed book Who s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.

10 Fact Sheet for Paladin Company Paladin Paladin is an information services company and not a financial services company. Investors use our search engines to find high quality professionals and our online documentation to screen and select advisors. Paladin Services Paladin is focused on helping investors avoid bad advisors and select high quality professionals who can help them achieve their financial goals. Paladin Independence Paladin is 100% owned by partners who are active in its business. No financial services company or advisor has an equity stake in Paladin. Paladin Licensing Paladin is not licensed to sell any type of financial product or advice, nor can it participate in the revenue streams of Registry professionals. Paladin Objectivity Paladin does not benefit financially from the selection decisions of investors who use the Registry to find, evaluate, and select financial advisors. Paladin Experience The president of Paladin spent 29 years in the financial services industry where he worked with thousands of investors and advisors. He also authored Who s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor. Paladin Analytics Paladin professionals use proprietary databases and analytics to find, screen, evaluate, and rate top quality financial planners, advisors, and managers. Paladin Endorsements Paladin does not recommend or endorse particular advisors. For more information, contact Paladin at info@paladinregistry.com

11 Paladin Registry Fact Sheet Minimum Standards The Paladin Registry has the highest minimum standards in the financial services industry. There are 650,000 licensed financial advisors and only 500 of them are profiled in the Registry. Full Disclosure Financial professionals must be willing to provide full disclosure to investors to be admitted into the Registry. Only a very small percentage of advisors are willing to have their credentials, ethics, and business practices documented by Paladin. Comprehensive Due Diligence All financial professionals must complete a comprehensive due diligence process that is conducted by Paladin analysts. Advisors must answer more than 140 questions that the analysts use to evaluate the professionals credentials, business practices, and integrity. Ratings The due diligence information that s reviewed by Paladin analysts is also used to develop ratings for the financial professionals. Advisors who are rated no-stars, one star, and two stars are not eligible for admittance to the Paladin Registry. Only three, four, and five star professionals are admitted. Profile The profile provides documentation for the credentials, wealth management services, methods of compensation, levels of service, and other pertinent information for each Registry professional. Disclosure Statement The disclosure statement provides documentation for the compliance record, potential conflicts of interest, compensation, and expenses for each Registry professional. Educational Content The Paladin Registry website also provides educational content that helps investors avoid bad advisors and select high quality professionals. Standardized Data Paladin provides the same information for each professional, so it s easy for investors to compare multiple advisors to each other. For more information, contact us at info@paladinregistry.com

12 Fact Sheet for Registry Professionals Top 10% of Professionals Admittance to the Registry is limited to the top 10% of financial professionals based on their competence, integrity, and investor-friendly business practices. Types of Professionals There are three primary types of professionals in the Registry: Financial Planners, Financial Advisors, Investment Managers, and professionals who provide combinations of these services. Registered Advisors & Fiduciaries More than 90% of Registry professionals are Registered Investment Advisors or Investment Advisor Representatives and 95% acknowledge they are financial fiduciaries. Ratings The Registry has a three star minimum. 28% of the professionals in the Registry are rated five stars, 52% are rated four stars, and 20% are rated three stars. Education & Experience 100% have one or more college degrees and/or certifications. Degrees include: BA, BS, MBA, MS, MA, JD Certifications include: CIMA, CFP, CFA, CPA/PFS, AIFA, ChFC, CLU The average experience for Registry advisors is 16 years in the financial services industry with similar amounts of experience in their core competencies. Compliance Records 100% have clean compliance records based on Paladin s review of any disclosures. Compensation 100% are compensated with one or more types of fees: asset-based, fixed, or hourly. Some advisors also provide wealth management services for commissions. Professionals, Assets & Clients More than 500 professionals are profiled in the Registry. They are responsible for $28 billion of assets and 42,750 investors. For more information, contact Paladin at info@paladinregistry.com.