Posted By: CFP&WM On: Aug 28th, 2013 In: Beware - Horror stories Financial planning Investing Money Matters

Angie’s List: Off Base Advice on Financial Planners

Angie’s List (ANGI) is a much advertised method of reviewing recommendations of other individuals as to their “personal” experiences when dealing with a variety of trades and professions, which include contractors, doctors and financial advisors.

I have no experience with Angie’s List personally but I did run across a 2009 blog quoting Angie entitled, “Hiring a Financial Planner: Angie’s List Has Suggestions “ and felt compelled to correct any misconceptions caused by her comments. Cheryl Reed, Director of Communications at Angie’s List confirmed that those were Angie’s statements and  “it would be accurate information as to that time”.

To be frank, some of her advice is very sound, such as “Hiring a qualified, objective financial planner can help you get the most out of every dollar – and it could even help you avoid mistakes that could cost you big.” On the other hand, some of her comments are way off base and here’s why!

Angie Listed 10 tips for hiring a financial adviser and the first one was to: ”Check certification: Hire an adviser who is a Certified Financial Planner and/or Resident Investment Adviser. Check Angie’s List, the CFP Board of Standards, the National Association of Personal Financial Advisors and the Financial Industry Regulation Authority.”

Angie ‘s advice while the intent is good, is off base

Angie should have checked her facts or hired a proofreader before giving advice to consumers.

  1. There is no such thing as a “Resident Investment Advisor”. She was meaning Registered Investment Advisor (RIA). However a representative of RIA is not certified. An RIA involves passing a test and meeting the State or SEC standards as an Investment Advisor.Using the services of an RIA is very worthwhile since they operate in a fiduciary capacity and always keep your best interests first, above all else, however it is not a “certification”. You should also remember that “keeping your bests interests first” is typically not true of the financial services companies that sell products and which operate under a lower standard of legal protections known as the “Suitability Standard.”Cheryl Reed confirmed that “Resident” was a typo and will correct it. But the inaccurate advice has been there for 4 years.
  2. The advisors that are approved to use the Certified Financial Planner© designation are awarded that right by the CFP Board of Standards. In other words they are one in the same and not two different certifications, as Angie seems to suggest.However, Angie’s advice of using an advisor that is approved to use the CFP© marks, assures a level of education, experience and ethics ans is is a good idea.

    Using Angie’s List of Financial Advisors is misleading

  3. One of her recommendations was to “Check Angie’s List”. Really? How apparently self-serving; clearly, she holds AL services in very high regard. However, Angie’s List is NOT a certification but is rather a mere testimonial or a collection of (subjective) “opinions.”
  4. The Securities and Exchange Commission which oversees RIAs states, “The use of testimonials, which include any statement of a client’s experience with the adviser or a client’s endorsement of the adviser are prohibited under the Advisers Act.” The reason is that testimonials are not reliable and can be very misleading.
    As an example, one Yelp poster stated, “Angie’s List is unreliable. I know business owners who pay for customers’ memberships there to post favorable reviews.  If you are a business that is not a paying member, you cannot dispute or have a fake review that is bad or resolved taken down. How would you like to have to pay just to see or dispute a review on your biz?  There are 5 star companies on Angie’s list with an F rating with the BBB.
  5. ”According to Geoffrey Brown of The National Association of Personal Financial Advisors (NAPFA) does not issue certifications either. It is a membership organization where members attest that members be a CFP designee, maintain continuing education, abide by a code of ethics and the fiduciary oath as well as be “fee-only” (no commissions).
    Again her advise when selecting a financial planner is worthwhile since hiring NAPFA member is a great way to be sure that you are certain as to their experience, fiduciary status and education levels are met, but it is not a certification.
  6. FINRA does not certify anyone either according to Tim Chan at FINRA. It is industry self-regulation body and is not even a part of the government. It administers tests and keeps records on those that are representatives of Broker Dealers.Ms. Reed admitted in a recent email, that it might be more correct to have used the words ”credentials” or “professional affiliations” rather than “certification”.

Who does Angie think qualifies as a Financial Advisor?

When I looked at the companies listed on AL in Sacramento California as Financial Advisor it is a joke! I found bail bonds companies, advertising companies, credit card processing companies, designers and companies that were located in far away places such as New York all listed as “financial planners” in Sacramento.

Ms. Reed of AL responded, “Our search function will sometimes return companies that within the reporting or profile contains the same word as those entered for search. We’re always trying to improve that functionality.”

After being in business for as long as AL has and now being a public company, are we the public expected believe that AL’s computer system can not distinguish a cake decorator or travel agent from a financial advisor?

There are numerous citations on the Internet as to inherent problems with AL’s methodology and the business model.  John Moore on a The Motley Fool blog reported, “Most of the revenue is from vendors — they pay quite a bit to get on Angie’s good side. Right now, Angie’s List is playing both sides of the fence. It takes money from vendors, and puts them on Angie’s List … this “double dip” approach does not pass the “smell test” with many once-satisfied customers.

Could it be that all of these non-financial planners are listed so as to get these companies to pay Angie’s List more fees even though they have nothing to do with financial planning? In any case the recommendations are not helping the public while they might be helping her bottom line.

Angie contradicts her own advice

Recall that Angie had recommended using the services of a CFP®, or RIA and a NAPFA member when selecting a financial planner, yet the Angie’s list of over 720 categories does not include the category of “financial planner”.

The closest category listed would be “Financial Advisor”. In that category, when again reviewing Sacramento, the list does not contain local CFP’s, RIA’s or NAPFA members as she recommended that people should hire.  It seems a paradox, her list is filled with companies that:

  1. Do not provide advice in the financial area- cake decorators, cash advance, bails bonds, travel agencies
  2. Pay a fee to be on Angie’s List
  3. Are financial services companies that provide conflicted advice due to commissions rather than the fee only of an RIA or NAPFA

Asking for references is a flawed idea

Her second tip tells people to “Ask for references”. Again this is off base. If an advisor had 100 clients and 95 thought the planner was terrible and 5 thought the person excellent, what clients’ names do you think that the advisor would provide. This is a perfect example as to why the SEC bans the use of testimonials by RIA’s.

To better understand what you should look for when finding a financial planner or advisor please review the Forbes.com posting “What To Ask Your Potential Financial Advisor”.

When Ms. Reed asked if Angie would like to have a conversation on topics for this article there was no response after 5 days.

 

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