Lies versus 'good faith' advice

By Bob Moeller
WEAC Member Benefits

May 2007

Financial Planning Seminars
Achieving Financial Independence

"I don’t know who to trust” or “I’m not sure if this investment is a good one or not.”

Members are wise to question anyone trying to sell them investments because there is a lot of bad advice being given, and a lot of awful investment products being sold by salespeople quite willing to lie in order to get a quick commission or high fees. Frequently these salespeople will have a few initials after their name to impress you.

A couple of good things happened recently that will benefit the consumer. First the Certified Financial Planners (CFP) Board has put up for consideration by members the proposal that CFP’s “shall at all times place the interests of the client ahead of his or her own.” This is true even if the CFP doesn’t offer financial planning services. If the CFP does offer financial planning services, his or her responsibility changes from “act in the interests of the client” to an obligation to provide the “duty care of a fiduciary.”

Then they define fiduciary as “one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interests of the client.” The term “fiduciary responsibility” is a potent deterrent to the sale of bad products. If all financial salespeople had fiduciary responsibility, many of the products that members now own would never have been sold to them.

I am a CFP and I’m proud that the CFP Board is putting it that bluntly. I am also a Registered Investment Adviser (RIA), and all RIAs are obligated to take fiduciary responsibility.

I recommend that you request the following statement in writing, on letterhead, signed from anyone who wants you to purchase an investment product or services: “I am marketing financial services or products. I am accepting fiduciary responsibility for my recommendations and am committed to acting in utmost good faith in a manner I believe to reasonably be in your best interests.” If they make excuses, don’t buy.

WEAC member benefits include discounted summer fun activities

WEAC Member Benefits and NEA Member Benefits offer an array of services and programs. Following is a summary of some of the most popular benefits, beginning with seasonal discount arrangements with Wisconsin attractions:

• Noah’s Ark in Wisconsin Dells, America’s largest water park, discounted tickets for an all-day, unlimited pass including mini-golf at the best discount available: $22.64 plus tax. Order tickets online at www.noahsarkwaterpark.com by clicking Online Tickets Here. New customers click on Create an Account and returning customers click on Log Yourself In, enter Group Pass Code: weac040607, click Continue, Standard Pass and continue checkout process.
• Mt. Olympus Water & Theme Park in Wisconsin Dells discounted summer 2007 (May 26 through September 5) tickets may be ordered online at www.mtolympusthemepark.com/weac for $23.76 plus tax. Click on Tickets, Online Tickets, Buy Tickets, and in the Special Promotions Box at the right side of the screen enter Special Promotion Code: WEAC
• American Players Theatre - Educator Night Performances at discounted ticket price of $17.50 (regularly $32-$38). See guide to the plays, dates and ticket ordering information in the OnWEAC Members Only site at www.weac.org.
• Madison Repertory Theatre - Subscription renewals are available to educators at the following discounts: 20% for four-play package and 25% for five-play package. Details of the 2007-2008 season productions are available on the Members Only section of OnWEAC at www.weac.org.
• The OnWEAC Savers’ Club. There are more than 180,025 merchant locations including 352 national brands where WEAC members can take advantage of money-saving specials and exclusive discounts. Access Development Corp. – which operates the OnWEAC Savers’ Club – recently introduced its online travel booking service which enables members to compare and book rates online with a low-price guarantee. Members can save at more than 75,000 hotel properties worldwide, as well as on cruises and vacation packages. Go to OnWEAC at www.weac.org, log in to the Members Only site and click on the Savers’ Club card at the upper right corner of the screen. If you need a Savers’ Club card, contact Diana Buchholz at buchholzd@weac.org. Please include your full name, home address and telephone number.

Some of the other benefits available to WEAC members include:

• No-cost individual financial planning appointment with Bob Moeller, WEAC’s member benefits specialist. To schedule an appointment, contact Diana Buchholz at 608-276-7711 or 800-362-8034, extension 253.
• WEA Credit Union, a not-for-profit member-owned cooperative that offers a broad array of financial services. Offerings include certificates of deposit, IRAs, money market accounts, checking accounts, MasterMoney debit card, MasterCard, home equity LOC Loans, retirement mortgages and guaranteed student loans. Access funds at more than 2,500 shared branch locations in the U.S. For more information, call 800-457-1142 or go to www.weacu.com.
• NEA Member Benefits include the Attorney Referral and Educators’ Employment Liability programs (go to the Members Only section of OnWEAC and click on Legal Services) and the Magazine Service with more than 800 titles guaranteed at the lowest prices online (go to www.neamb.com or call 800-968-7624). Visit the NEA Member Benefits Website at www.neamb.com or call 800-637-4636 for discounts including: Car Rental Program with Hertz or Alamo, NEA Cellular, NEA Bookstore, and Collette Vacations and Tours. Also on its Web site are term life insurance plans, and financial services including the NEA-sponsored Credit Card Program and the NEA-sponsored FDIC-insured CD and Money Market Account.

Putting the interests of clients first

The Investment Advisers Act of 1940 set forth fiduciary responsibilities for investment advisers.The SEC decided in 1999 that certain broker-dealers (stockbrokerage firms) would be exempt from these rules. Of course, more and more brokers were getting involved in financial advice and account management, rather than just selling stock. This exemption became known as the Merrill Lynch rule.

The Financial Planners Associa-tion (FPA) believed that brokers should not be exempt from the fiduciary requirements of the law, so they sued in 2004. On March 30, 2007, an appellate court agreed. Essentially, the FPA argued that stock brokers should not be able to offer the same advisory services as Registered Investment Advisers (see article) without requiring brokers to put their client’s interests first.

I have been critical of life insurance agents but there are stockbrokers who sell trash for a quick profit too. This court decision should benefit investors everywhere.

Posted May 29, 2007