My girlfriend was telling me a story the other day about an individual who came to their work. My girlfriend is a teacher in a major city school district. Every year there are individuals from financial institutions and banks who come in and pitch their products (generally retirement packages) to these teachers. Unbeknownst to them, they're being persuaded to buy these packages that give commissions to the individuals.
In the particular case of my friend, the individual who was pitching retirement products began telling the teachers the importance of putting their money away early in their life so that it can grow and provide them benefit in retirement. Due to the fact that my girlfriend is probably sick of hearing my financial advice, and the fact that she speaks her mind, she spoke up and said "do you have a lot of hidden fees." The individual laughed, and dodged the question stating "all of our fees are listed in our documents."
With this being said, not everyone out there is just trying to sell you specific products. Some of them truly have your fiduciary interest in mind. It is important however to find those people that do care about your best interests. Tony Robbins' book "Untouchable" touches (no pun intended) on the current state of the financial advisory industry. Through his book he states that studies and research has shown that only 46% of retirement advisors have a retirement plan of their own. In addition, out of the "308,987 financial advisors in the U.S., only 31,000 - approximately 10% - are registered investment advisors." - Fidelity Institutional Asset Management and Unshakeable by Tony Robbins.
These statistics get even worse when you factor in investment advisors who are dually registered. Investment advisors can register as a fiduciary (required to act in your best interest), and as a broker (earning commissions on products that they sell). There's a major grey area as well, where they are able to ditch the fiduciary obligation when they act in the manner of a broker. So, at the end of the day they don't really need to act in your best interest.
In the end, Unshakeable quoted the numbers of roughly 5,000 out of the 308,987 financial advisors in the world who have a true financial obligation to act in your best interest. The rest certainly can help you with your finances, but have the potential to take a slight cut on the side.
So how can you make sure you know who your advisor is looking out for you? Here's a few simple ways:
Check for certifications!
- As someone who has taken the cpa exams, I can personally attest to how much of a pain in the ass they are. That being said, you are definitely tested on a lot of material, and need to know your stuff.
- Remember that this doesn't guarantee that they're going to be a great advisor and perform well.
Look for someone with experience dealing with similar issues to your issues
- Let's go back to the 46% of retirement advisors who don't have a retirement plan of their own statistic. If you were looking for a retirement advisor, would you work with them? NO! Look into the history of services that they've provided, and if you can, some testimonials from previous clients.
Find someone you like
- I don't mean you need to become best friends with this person, but someone who you can create a personal connection.
- You're going to be trusting this person with your money. If you don't trust them before giving them your money, then definitely don't give them your money!
Lastly, check the groups that they're involved with and their disclosures
- If they mention FINRA (Financial Industry Regulation Authority) or SIPC (Securities Investor Protection Corporation), they can act as a broker and earn commissions off of the products they sell you.
At the end of the day, financial advisors are great. In fact, I personally would love to be one. If you can find one though that is required by the law to act in your best interests, that's even better. The important thing is that you trust your advisor and that you feel comfortable investing your money with them. Hopefully some of these tricks can help you to find one that suits your needs.
**
I hope that you found this post interesting. If you have any questions, please comment below. My goal with this profile is to make frequent posts about finance, cryptocurrencies, investment, and wealth generation. I plan to not only make posts, but also youtube videos, and give away free excel workbooks to assist you in your personal finance goals. If this interests you, please let me know and follow my profile. Additionally, if you would like to reach out and ask any questions/request that I make a post on a topic, please reach out to me at [email protected].
**
Just my opinion. Sorry for the incorrect phrasing and typos, I'm watching Wonderwoman with my daughter right now and getting distracted. 😀
good movie! cgi in the middle is a little janky
Imho, everyone should worry about their own finances. Advisors do not know any better than the investor and if they do, then why do the people they are "advising" typically more wealthy than them. I been in the financial services industry 20 years, and as Warren Buffet has said, far more many people on Wall Street have made money as salesman than as investors.
I agree with you that they should definitely watch their own finances, and that most people on wall street are salesman. I think that the benefit advisors can bring to individuals is the psychological aspect of someone watching over their money. I also think that unfortunately there are a lot of misinformed people who do need someone helping guide them in the right direction. In general though, yes if people want to get the most out of their money they should certainly learn some personal finance and make their own decisions.
👍
Soooo true. It's like a government mandated funnel, making it rain on Wall Street.
yeah the whole system is so obfuscated, people like my grandma definitely need someone they can trust. Everyone else who can be bothered, (most aren't going to save anyway) could just as easily be redirected to this two sentence website I'm thinking of making on retirement.
Plan A S&P 500 Vanguard ETF
Plan B Bank on Yourself.
Save yourself giving up 60% of your returns