Disclosure: This post represents my opinion based on my knowledge and experience in the matters involved.
In a blog post dated May 30th, 2012 on an ASPPA/NTSAA blog (there is no author for the post) a blunder was made while attempting to post misleading information regarding data that the Los Angeles Unified School District released.
The post is below (I included a screen-shot so that when they change the headline after reading this post, you’ll know I wasn’t making this up).
The post itself is misleading in nature, but what they really get wrong is the fact that the providers they cite as being providers of “Personal Investment Advice” are not such providers. The body of the article states:
…more than 95% of plan participants choose plans that provide professional investment advice.
Ignoring for a moment the incorrect use of the term “plans” (should be product)..if you reviewed the data you’d learn that none of the providers are exclusive providers of any Investment Advice, in fact only a few of the providers could legally give Investment Advice and for the most part, they don’t (with a few exceptions).
If the “professionals” that ASPPA is referring to are actually providing “Personal Investment Advice” they are likely doing so in violation of State and Federal Law as the vast majority of these individuals are agents of insurance companies or Registered Reps of Broker/Dealers – NOT Investment Advisors subject to the Investment Advisors Act of 1940. If these individuals are in fact providing “Investment Advice” they must be licensed as an Investment Advisory Representative of a Registered Investment Advisor. Insurance agents are rarely IAR’s and if they are not, they are not allowed to provide investment advice. Some, but not all Registered Reps are IAR’s and even the one’s that are may not be providing Fiduciary based investment advice.
So what type of professionals are these people? Sales Professionals.
There is nothing inherently wrong with being a “Sales Professional”, after all – we are all selling something – however, a Sales Professional has no Fiduciary Duty to the participant and cannot give Investment Advice or represent that they are doing such. The fact that ASPAA/NTSSA cannot distinguish between the two is disturbing, especially since I have directly challenged them on the issue previously, see here.
I’ll address the distortion of the data in a later post, but ASPPA should immediately take down this errant blog post and correct themselves. The data does NOT show that 95% of participants in LAUSD make use of “personal investment advice” since almost none of the providers on the list are legally allowed to provide such advice. If ASPPA believes these “professionals” are providing such “investment advice” they should provide such information to the appropriate authorities.
There needs to be a clear line drawn that participants can understand when they are being provided investment advice through a qualified fiduciary or whether they are being sold a product by a product specialist who has no duty to place their interest first and maybe highly conflicted. It is clear to me that ASPPA cannot lead on this issue given that they apparently can’t tell the difference. ASPPA/NTSAA – PLEASE prove me wrong and correct your blog post.
Scott Dauenhauer CFP, MSFP, AIF