Industry Needs to Rid Itself of Misleading Labels

Profound misrepresentation is just one of the many ways the financial services field misleads customers with language.

Language matters. Most financial services practitioners call themselves financial planners or financial advisers. But in reality, many, if not most, are salespeople selling products to earn commissions.

Why do they call themselves financial planners or financial advisers? Because that’s what customers want and need. Unfortunately, that’s not what most customers are getting.

This profound misrepresentation is just one of the many ways the financial services field misleads customers with language. If we want the public to be more trusting of us, we need to start by ridding ourselves of these highly misleading labels.

Even practitioners who don’t sell product typically call themselves financial planners or financial advisers. In fact many, if not most, should be calling themselves investment managers. Other than managing portfolios, how much retirement planning, estate planning, tax planning or other financial planning, or advising, are they really doing?


So when the advent of automated portfolio management came around, the label “robo-adviser” was coined. The fact that no “advising” is going on here didn’t faze a field that’s entirely too comfortable with false labels. Robo-investing is the correct term. Have we become so numb to the misuse of labels in financial planning that when this new service is dubbed with the highly misleading label of robo-adviser we don’t even notice it?

Another highly misleading label is “fee-based.” As a fee-only, comprehensive financial planner, when I ask prospective clients how and why they chose me, many of them say it’s because I’m fee-based. These are people who have done their homework and have concluded that it’s in their best interest to hire someone who is not a salesperson pushing product, but rather an unbiased professional whose compensation does not in any way depend on how and where clients ultimately decide to invest their life savings. Yet based on their research, they still don’t understand the very important distinction between fee-only and fee-based.

I urge the profession, if it aspires to be a profession, to adopt the term “fee-and-commission based” for practitioners who charge both. Further, financial practitioners should be required to disclose the percentages of their income derived from fees and from commissions. And to avoid confusion, use of the term fee-based should be prohibited.

Do I think these recommendations will be adopted? No, I’m not naïve. Financial interests trump the truth. And I’m not talking about the financial interests of the client here.

The financial planning profession (and I will call it a profession for now because I hope to appeal to the better angels for change) is fraught with deception and outright thievery. Just follow the news and you’ll see one episode after another. Large firms are fined monthly. Trusted financial advisers, including some very prominent fee-only advisers, too frequently violate their clients’ fiduciary trust. There are lots of reasons for the public to be skeptical about our honesty and integrity.


Authentic labels mean what they say and say what they mean. Precision in labels is a sign of honesty and integrity. Deceptive labels designed to tell a customer that a practitioner is something he or she is not are a stain on the profession that must be cleansed in order to establish trust with the consumer.

Let’s not give the public yet another reason to mistrust us. When the first thing someone encounters about our profession is a false and misleading label defining the basic structure of our business, it only adds to their sense of mistrust in who we are as an industry and what we do.

I watch with fascination the debate about adopting a fiduciary standard for brokers and salespeople. Does calling salespeople fiduciaries make them fiduciaries? I don’t think so. It would just embed another deceptive label in a field already peppered with false labels.

Feb 7, 2016

Written by our friend David M. Zolt

David M. Zolt is a fee-only financial planner and president of Westlake Advisors, a registered investment adviser in Westlake, Ohio. Contact him at