John Proctor Braica, president of the Rhode Island Society of Financial Service
Professionals, flips on CNBC or picks up the Wall Street Journal and inevitably
sees or reads financial advice from a certified financial planner. The media,
he said, has become enamored with the CFPs.
Ironically, said Braica, the more schooled professionals of the industry, Chartered
Life Underwriters and Chartered Financial Consultants – the CLUs and ChFCs –
tend to get less attention.
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Braica is working to change that. It’s one of his main goals for his one-year
term as president of an organization that is composed of about 200 local members
and about 32,000 across the country – all under the umbrella of the American
Society of Financial Service Professionals.
Braica has got nothing against certified financial planners. But he does find
it frustrating, the way the print or television media can often wrap themselves
around an idea or a concept – often taking the easiest, quickest road to travel.
"The more academically trained individual is the ChFC, but we often get
short shrift," he said. "The press over the past five to 10 years
has pushed the CFPs. The irony is that we have better credentials."
Braica explains that CLU and ChFC professionals must complete a minimum of eight
courses, compared to the five required to obtain a CFP license.
"We have a minimum of eight courses – and most of us have taken between
16 and 20, said Braica.
Why the lack of respect, so to speak? Braica has a theory. People, he said,
simply aren’t big fans of insurance. It is an intimidating industry – an intimidating
subject.
"People hate life insurance," said Braica. "They look to buy
it when they are young and have kids or when they are older and have a tax problem."
Still, Braica sees reason for optimism. Regardless of whom they are talking
to, people are talking about their finances and planning for the future. Not
as many are taking the action they should, but addressing such a critical issue
is at least a start.
But there is so much to learn, to refine, he said. For example, according to
Braica, the average person is putting about 7 percent of his or her income into
a 401k plan, but much of that money is being so conservatively invested that
it is not keeping up with inflation.
"If people don’t take market risk, they accept inflation risk," said
Braica.
In a recent interview with Providence Business News, Braica, who teaches full
time at Johnson & Wales University and runs an estate planning business,
offered his take on some of the key issues facing the industry.
PBN: Are people planning for their financial futures the way they should?
BRAICA: No, they are not. Only about 25 to 30 percent of Baby Boomers
have seriously saved for retirement. Over the next decade or two, they are going
to have a severe impact on retirement and on products in related industries.
We have another wave coming – the demographics are there. This is why the banks
and everyone else is jumping into financial services. The need is there.
We hear of people diagnosing their own illnesses or following medical advice
after surfing for information on the Internet. Is the rise of the Internet a
cause for concern in your industry – the possibility that people may turn to
their home computers for financial advice?
A growing percentage of the population is computer literate and is using the
computer to find things. The Baby Boomer generation is very computer literate.
There is a lot that can be gleaned from the Internet. But the problem with the
Internet is that you do not know the veracity of what is there. That is an inherent
danger. The Internet gives access to a great deal of information – much of which
is not accurate. Some people are sophisticated enough to go at it alone. We
are a society that likes free — that likes no load funds. We’re going to
see more and more of the Internet, but we have to look at who is posting and
do they have credibility?
We have been told to put money away early and allow compounding interest
to pave the way to a financially affordable retirement. Do you still see people
who for whatever reason, have ignored that advice and are nearing retirement
age in a state of fiscal panic?
I sometimes see medical doctors who have $20,000 in accumulated savings. They
have had three wives and a boat, but if you get into your 50s and you haven’t
put any money away. As a young person you should be putting 10 to 15 percent
of your earnings into your long-term investments. There is power in compounding.
Unfortunately most young people don’t have $2,000 or if they do, they think
they are going to live forever.
