Full-time professional advisor

As for hobbies, Brothers collects old stock and bond certificates. Why? “Because they tell stories,” he says. “People come in and they talk about Facebook [as an investment] … or they want to get out of the stock market and go into bonds. I’ll take out this whole row of bonds with the coupons still attached [and] I tell them, ‘If you’re going to lend your money to somebody, you’d better make sure they’re going to pay it back’.”

An object lesson about money

In Brothers’ view, expired certificates from long-dead companies teach an object lesson about managing your money: “You can go and buy nothing but one stock today, but things change. That’s why you need full-time professional management looking after your investments.”

Note the phrase: “full-time professional management.” For Brothers, that tells you all you need to know about whether your financial planner is qualified to manage your money.

Brothers, elected president of the Institute of Advanced Financial Planners (IAFP) in May, represents a relatively small group (about 400 members across Canada) of full-time professional financial planners who hold the registered financial planner (RFP) designation. His election as president of the IAFP this year follows eight years as a board member with the group.

Brothers has spent 25 years in the financial planning industry – 21 as an RFP. “For the past 18 years now,” he says, “I’ve been providing comprehensive financial plans for clients.”

Brothers would like to see more financial advisors get their RFP. In Saskatchewan, RFPs number fewer than a dozen, and Brothers is one of only two in Regina, a city of 215,000. But there are many, many people – hundreds in the city alone – who hold themselves out as being financial planners.

Brothers objects to people calling themselves “financial planners” when they are not fully trained in the profession and not principally involved in preparing financial plans. He recalls arranging a commercial loan a few years ago at a financial institution with a loans officer who had a framed financial planning designation certificate on display.

“She’s doing loans administration,” Brothers says. “She’s not doing financial planning. But, on her card, it says she’s a financial planner. That’s what we’re trying to get away from.”

Of course, RFPs can work at banks or other financial services institutions, such as brokerage firms and mutual fund dealers. Some RFPs are compensated by fees only, while others, like Brothers, are remunerated based on assets under administration.

Unfortunately, while many people are called, few are chosen – or, to be more precise, choosing – to become an RFP.

“Financial planning is a great thing,” Brothers says. “Lots of people espouse it, but there aren’t that many people across the country who choose this as their full-time occupation. They don’t see the value of working toward the higher standard. They don’t feel that it adds to their bottom line.”

Full-time planners

Many financial advisors who have taken a course or two do financial planning on the side while selling life insurance, mutual funds or stocks and bonds. But, Brothers says, RFPs are financial planners who make their living developing financial plans for individual clients.

“We define ourselves as being full-time, practicing financial planners,” Brothers explains, “who have had a [financial] plan peer-reviewed and employ all six steps of the financial planning process.”

Another quality that distinguishes RFPs from other financial planners is that RFPs must have a university degree or comparable training and a minimum of three years’ experience in the financial services industry.

“The RFP is kind of like getting admitted to the bar [in the legal profession],” Brothers says. “You get your education, submit your plan, jump through the other hoops, then you are a practising professional.”

Although Brothers laments that so few so-called “financial planners” have earned their RFP designation, being one of the few RFPs in his city actually has been good for his business: “There are discerning consumers. They do their research, and I’m the net beneficiary of that.”

Brothers believes strongly in value investing. That’s why he’s an investor in and director of Value Partners Investments Inc. (VPI), an advisor-owned investment firm founded in 2005 in Winnipeg by a group of investment advisors, many of them financial planners.

“In the [mutual fund] industry,” he says, “the No. 1 obligation is to the shareholders, not the unitholders. They’re in the business of gathering assets and charging fees.”

The goal of VPI, according to Brothers, is to build an investment firm that puts unitholders first, keeps fees low and doesn’t have all the bells and whistles that push up the costs. The strategy, he says, is to select portfolio managers who invest in profitable companies that pay dividends and have sustainable competitive advantages.

In order to keep costs down, VPI needs investment advisors who don’t earn commissions from the sale of investment products to their clients.

“We’re looking for advisers who do commission-free business and can write a cheque to buy shares [in VPI],” says Brothers. “It’s amazing how many financial advisors can’t write a cheque and can’t live without their next commission cheque. It’s shocking.”IE

© 2012 Investment Executive. All rights reserved.