Lynn O'Shaughnessy

About a year ago, Smith Barney, the brokerage giant, announced that it would start calling its stockbrokers "financial advisers." Most Smith Barney clients, if they heard this pronouncement, probably greeted it with some variation of "duh." These investors already assume that the brokers, who handle their accounts, are advisers.

While the clients would have been puzzled by the need for a press release, many of the investment advisers who belong to the National Association of Personal Financial Advisors were apoplectic. NAFPA, which has 1,000 or so members, is the financial industry's little engine that could. Despite its small size and diminutive clout, the organization of fee-only advisers starts tossing china plates when one of the Goliaths in the financial industry does something dastardly.

Peggy Cabaniss, the NAPFA chairwoman, rightly called Smith Barney on its linguistics shenanigans. "The term 'financial adviser' should be reserved for professionals who give objective financial advice and who always put the interest of their clients first," Cabaniss wrote. "It should not be co-opted by salespeople whose only loyalty, both financial and legally, is to their employer."

Millions of people who rely upon stockbrokers for investment advice won't know what the heck Cabaniss is talking about. And that, of course, is the problem. The brokerage industry has worked hard to erase the distinctions between brokers and investment advisers. And Smith Barney isn't the only linguistic contortionist. Just try finding any brokerage firm that hasn't embraced honorific titles for its brokers. If you pick up any stockbroker's business card today, you will find that they've morphed into financial consultants, wealth managers, retirement specialists and all sorts of other titles.

Playing loose with titles wouldn't matter if they were inconsequential, but they aren't. You see, the stockbroker who handles your stock trades and perhaps sold you some annuities is essentially a salesman. If you're only buying shares of Apple Inc. or whatever other company you take a fancy to, maybe this won't matter. But if you expect your financial point person to provide you with a comprehensive plan that could include how you're going to fund your kids' college education and your golden years, you may have walked through the wrong door.


Lynn O'Shaughnessy

Lynn O'Shaughnessy is the author of Retirement Bible.

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