Financial Counseling

[dczech09]

Hi everyone.

I have a couple of deals in the making. I will be working with a NPO and a financial coaching/counseling practice to assist with consultations. I plan on offering advising services for budgeting, debt management, insurance needs analysis, and investment planning.

I will NOT be selling any financial products of any sort, and I will NOT be giving any specialized investment advice such as advising what specific product to buy. My advice will be general and more than anything will help my clients get on the right track.

I guess you could call this financial coaching/counseling/consulting.

My question is this: Do I need any special licensing? As far as I know, the Series and insurance licensing is only needed if I were to sell financial products and accept commissions. As long as I avoid that, I think I should be in the clear.

I know Dave Ramsey counselors work in this same capacity and do not carry licenses. Ultimately, I just wan to make sure that I am not breaking the laws.

[jpg7n16]

I plan on offering advising services for budgeting, debt management, insurance needs analysis, and investment planning.

What type of insurance needs analysis? And what type of investment planning?

Could you give an example of the type of advice you hope to give?

I would think that asking someone within the legal/compliance section of the firm would be able to give you the answers you need.

For the investments, my understanding is that even though it's a non-profit company, if you charge the client for the advice and that advice includes even simple investment planning, you are required to register. Because you meet the 3 criteria, you're giving investment advice (1), you're holding yourself out to the public as offering investment advice (2), and you're charging for services that include that advice (3).

From: Series 65 Study Guide - Regulation of Investment Advisors - Who Must Register As An Investment Adviser? | Investopedia

The provisions of the act set out both required and prohibited behaviors for advisers who meet the following definition:

An investment adviser (IA) is an individual or entity who:
for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.

To translate that definition into plain English, we can break it down to three main components:

1.Giving advice about securities ◦this includes references to securities in general, not just specific investment recommendations; for example, even advising a client to invest a set percentage in "stocks" is considered advice about securities

2.Being in the business of giving that advice ◦this refers to presenting yourself as an investment adviser

3.Being compensated for that advice ◦this includes receiving compensation of any kind, including fees, commissions, or a combination of the two - and the compensation does not have to be received directly from the client

[dczech09]

Interesting.

By insurance needs analysis I mean just a general determination of what type of coverage one should seek out. I do not mean finding the right carrier or policy, endorsement, rider, etc.

How does Dave Ramsey, Suze Orman, or any of the other people get away with giving financial advice as they do and they are not even licensed?

[kork13]

How does Dave Ramsey, Suze Orman, or any of the other people get away with giving financial advice as they do and they are not even licensed?

I believe at least Orman is (or was at some point) licensed...I'm not so bored as to check on some of the major gurus, but basically the legal side of it is covered by saying that what they say isn't intended to give specific investment/other recommendations. All of their shows have a proviso (tiny print on the screen or fast-talking recording at the end of the show) that says something along the lines of "the advice given is intended only for the specific individuals addressed and you should contact a financial professional for your particular situation"

[disneysteve]

How does Dave Ramsey, Suze Orman, or any of the other people get away with giving financial advice as they do and they are not even licensed?

Both do have some financial background. Dave Ramsey was previously a licensed insurance agent though he isn't anymore. Suze Orman was an account executive for Merrill Lynch and later vice-president of investments at Prudential Bache Securities (which impresses me more than an insurance agent - just saying).

[jpg7n16]

How does Dave Ramsey, Suze Orman, or any of the other people get away with giving financial advice as they do and they are not even licensed?

When you call in to speak with them, they do not charge you for the priviledge. I believe that's the reason.

They offer investment advice (1)
They hold themselves out to the public as offering investment advice (2)
They do not charge for that advice (no 3)

You must have all 3 to be included in the definition of "investment advisor" and then you'd have to register.

Kinda the same way we are able to post pretty specific advice here without requiring to be registered. We are not charging for the advice we give, and therefore are not included under the definition of "investment advisors."


Now for Dave's ELPs:

From: Frequently Asked Questions - Endorsed Local Providers - daveramsey.com

We look for professionals who meet the following requirements:
•Have the heart of a teacher
•Put the client’s needs first
•Have proper licensing – active license and in good standing
•Agree to help clients based on Dave Ramsey’s principles

By insurance needs analysis I mean just a general determination of what type of coverage one should seek out. I do not mean finding the right carrier or policy, endorsement, rider, etc.

I don't believe that you need an insurance license to determine "hey, you need life insurance" or "you should get a long term disability policy."

I could be wrong on that, if you're charging the client, and part of that is an evaluation of insurance coverage, that may require a licnese, but I'm honestly not sure. And couldn't find that answer on google.

[disneysteve]

Kinda the same way we are able to post pretty specific advice here without requiring to be registered. We are not charging for the advice we give

You mean I could be getting paid for this?

[jpg7n16]

everyone is trying to make a buck on the ones who are down and out its really twisted if you ask me

And what about those who are trying to help the "down and out" get to a better position?

Is their advice/service worthless?