Resolving A Financial Planner Conflict
August 29, 1996

Resolving A Financial Planner Conflict

Q. Until recently I had always been under the impression that a "certified financial planner" was "certified" by some financial member association or government agency that a dishonest and/or unethical practitioner would be held accountable. But the best I can ascertain is the "certification" really only indicates some level of educational credits.

Would you please give the names and addresses of any institutions or government agencies that unethical financial planners could in any way be accountable to for their actions?

---D. C., Mesquite, TX


A. If you have a grievance, get in touch with the International Board of Standards and Practices for Certified Financial Planners, Inc. at 1660 Lincoln Street, Suite 3050, Denver, Colorado, 80264 or call them at 303-830-7543.

Becoming a CFP is a not casual thing like "some level of educational credits". It requires that you take a course of study that generally requires about two years, pass a ten hour examination, have work experience in the field of financial planning, and agree to uphold the organizations' code of ethics. This is significantly more demanding that passing the tests for becoming a stock broker or other financial sales designations such as Certified Life Underwriter.

One indication that the program has some effect comes from a recent issue of Robert Veres' newsletter, "Inside Information". Mr. Veres reports on developments in the financial planning profession and has been known to take a magnifying glass to ungainly warts on his subject. I believe his reporting is insightful and even handed. In his July/August issue he compared NASD disputes that went to arbitration in the brokerage industry--- some 6,058 in 1995 with a total of 54 NASD disputes tracked by the CFP Board in the same year. While the dispute ratio was one for every 86 brokers ( using a very large 520,000 figure for the number of brokers) it was only one in 600 for the CFPs and he believes it would be less than one in a thousand for fee-only advisors.

"The lesson bears repeating", he writes, "as you eliminate the incentives to lie, cheat and steal, then people tend to do these things less often." Less often is not the same as "never"--- but the odds favor the certified planners.


Q. Please tell me why it is a good idea for Columbia Healthcare employees to participate in the Employee stock purchase plan instead of just buying the stock through a brokerage firm? I do understand that you get to buy it for a discounted rate, but they are holding your money for six months before they purchase shares of stock. Somehow I know it has to add up but I cannot see how it is an advantage for the employee. With Columbia being America's largest health employer, I am sure many readers would be interested.

---S.F., Dallas, TX


A. Many companies have employee stock purchase plans and for reasons that totally escape me, employees are often suspicious of them. Here's what the Columbia plans does: it makes painless automatic deductions from your paycheck and accumulates them over a six month period; it buys shares for you at no commission cost and at a 15 percent discount from the market price; and it takes the lower of two market prices from the beginning or end of the period. If the stock rose 20 percent a year, like clockwork, this would be the equivalent of an additional 10 percent price break on your purchases every six months. In addition, even if you saved $100 a month and accumulated $600, your purchase would be for an odd lot at a punitive brokerage expense.

Meanwhile, the only cost to you is that you lose the interest you might earn over the six months. On average you lose about 3 months of interest on the final sum invested or something in the vicinity of 0.75 percent. I think that's a very small price to pay for an automated investment plan that always gets you a sweet price.

What does the company get? Some cash "float" while the money accumulates; a growing and relatively stable base of shareholders; and increasing recognition from shareholder/employees that a profitable company is a good thing.

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