“All highly competent people continually search for ways to keep learning, growing, and improving.” – Benjamin Franklin

Competence

One of six core characteristics of a trusted financial advisor (character, chemistry, caring, competence, cost-effective and consultative), competence is certainly a non-negotiable requirement for any professional. But what exactly does it mean to be competent? And is it enough to just be competent?

At its core, competence is defined as having the necessary skill set, knowledge, resources and ability to do something successfully. “Successfully” being the operative word – not just satisfactorily or good enough – but rather possessing and demonstrating these abilities with proven success.

In my experience as a wealth manager, a competent advisor must provide the knowledge and insight necessary to chart an investment course customized to the unique situation of each client – as well as the discipline necessary to keep them invested when markets get choppy. I once heard an advisor’s role compared to a pedestrian bridge over an eight-lane highway. Yes, it’s possible to cross those lanes of traffic on your own, but getting to your destination will be a little more harrowing than if you cross safely over a pedestrian bridge. An advisor can point out the route best suited to your tolerance for risk and ultimate goals or destination.

In addition to providing investment expertise, getting clients safely over the bridge requires helping them to make good decisions. One based on the facts of a situation not the emotional reactions to that situation. Therefore, the competent advisor must ask questions, listen to clients’ answers, develop thoughtful investment and wealth management strategies, carefully monitor their progress, and serve as a personal Chief Financial Officer. This process keeps investors from reacting out of fear or “irrational exuberance,” and keeps them on the road to reach their goals.

Many professions require practitioners to hold specific degrees and pass comprehensive exams. For example, as a Certified Public Accountant (CPA), my credentials demonstrate a measurable standard of competency in accounting which is universally recognized by the profession, as well as consumers.

Unlike the legal, medical or even accounting professions, anyone can call themselves an investment advisor. That creates confusion, because consumers of financial advice often wrongly assume that 1) there are standards of expertise and care that all advisors share, and 2) anyone who provides investment advice must act in the client’s best interests.

In reality, only professionals registered as investment advisors with the Federal Securities and Exchange Commission (SEC) or comparable state regulators who operate as fiduciaries are legally obligated to put their clients’ interests first. Conversely, salespeople who work for brokerage firms place their loyalty primarily with their employers, not with their clients. That is, while fiduciaries always make recommendations that are in their clients’ best interests, brokers must adhere only to a “suitability standard.” This lesser standard requires only that the investment products they suggest and sell “suit” an investor’s financial needs and risk profile. And that leaves portfolios wide open to more expensive, less effective products.

While there has been much discussion about identifying a single standard of competency for financial advisors, there is currently a wide variety of designations for financial advisors, which can be confusing or even meaningless without an understanding of their particular area of expertise. Perhaps the most recognizable designation is the CERTIFIED FINANCIAL PLANNERTM (CFP®) credential which signifies demonstrated competency through education, experience and examination. It entails an increasingly broad and rigorous educational curriculum, including a comprehensive exam with questions that require applied knowledge. A minimum level of experience is also mandated. At this time, CFP is perhaps the closest to providing for a minimum level of competency as well as a requirement for fiduciary. The fiduciary component is absolutely critical to establishing a trusting relationship by ensuring the investor receives objective guidance from an advisor who is required by law to put their clients’ interests first.

Certifications alone cannot guarantee successful outcomes. The capacity of a person to understand situations and to act reasonably and effectively over time will ultimately prove their competence.

Because a leader in any profession never stops learning, at Bernhardt Wealth Management we strive to expand our circle of competence through constant learning and a deep interest in all matters related to finance. As a team, we continue to develop our bench strength in order to best serve our clients and cultivate trusting relationships. We accomplish this by taking advantage of ongoing educational opportunities, taking our role as fiduciaries very seriously, and by spending the time necessary to thoroughly understand each of our clients’ unique circumstances and goals.

I hope you enjoy reading about the executives featured in Volume 8 of the Profiles series. They have each demonstrated competencies in their professions that exceed expectations and achieve extraordinary triumphs.

Gordon J. Bernhardt,
CPA, PFS, CFP®, AIF®
President and Founder
Bernhardt Wealth Management, Inc.
www.BernhardtWealth.com

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