With more than 310,000 “financial advisors” in the U.S., using a very broad definition, why is it so hard to find good advice? Mostly because the grand majority (about 85%) of these “advisors” are actually brokers or dually registered advisors/brokers where they sell investment or insurance products and earn commissions. Only a small percentage are truly independent advisors. An even smaller portion are both independent advisors and Certified Financial Planner® professionals providing comprehensive financial planning.
It’s Difficult to Decipher the Difference
Effective October 1, 2019, the newly revised CFP Board Code of Ethics and Standards of Conduct will require CFP®’s to act as a fiduciary when providing financial advice to clients. While not perfect and long overdue, this is a positive step toward separating out the distinction so badly obscured by brokers and others parading around as financial advisors. In reality, they are fake advisors.
We should not expect consumers to decipher that a broker calling herself a “fee based” advisor really just means she is charging some type of fee but is also receiving commissions or kickbacks from investment and insurance products.
Particularly at times of life transitions, e.g. selling a business, death of a spouse, a new marriage, it is critically important to understand exactly how an advisor works and if they sell stuff. Just because someone is “nice” or goes to your church does not mean they are a real financial advisor.
Fake Advisors are Best at Selling
Real investors have real financial issues that simply can’t be remedied by fake advisors. Loading up on expensive investment products won’t move you closer to a secure financial future, but it might help your fake advisor move closer to their goals!
Within a one-mile radius of our office there are probably at least two dozen financial/wealth advisors. Very few, however, are really advisors. Just because the big brokerage firms, banks, and even mutual fund providers have advertisements with buzzwords like “committed,” “dedicated,” or “tailored” does not alter the simple fact that these entities are mostly marketing machines.
The key for investors is to understand that fake advisors are best at selling, not advising. We sometimes see prospective clients who say they work with a financial advisor that they mostly like, but they wonder why he wants to sell them a product every time they meet? Well, that’s what fake advisors do!
The actual “advice” provided by fake advisors runs counter to their assurance of focusing on “your priorities” and overtaxes the credulity of informed investors. If your financial wellbeing is important, seek someone that renders real advice. Start there. Ready for a real conversation?