Big banks and insurance companies tell you the same story: We have the services to make all your dreams come true. Oh, and our advice is free! Unfortunately, while this claim sounds too good to be true – and it is! – many investors believe it. They worked hard for their money and they don’t want to “lose” it by paying for advice. But here’s what they don’t understand: They’re probably paying way more than they need to by getting “free” advice.
When it comes to “free” advice, nothing could be further from the truth.
Big banks and insurance companies prey on investors. They sell hope during times of plenty and fear when things are uncertain. That’s their secret to capturing returns from investors through all economic cycles. And they have many tools to do it.
I see too many clients and hear too many retirement horror stories to let this manipulation continue. Wall Street is set up to confuse investors and make money off of investors’ naivety. Stop being the victim. Here are 5 signs you’re probably working with the wrong financial advisor.
Salespeople are smart. They know they need to give you a lot of attention in the beginning to win you over and make you feel like you can trust them. In fact, they may not stop talking. Less time for you to ask real questions.
This is a sign that your “financial advisor” may actually be an unscrupulous salesperson.
Quarterly sales quotas mean you get a lot of attention up front, but when the quota is met, the attention typically stops. Real advice on something without an immediate payout? Salespeople don’t see the benefit.
These “advisors” may tell you a lot about investments based on complicated revenue agreements (which means the firms are paid better to deliver certain investments often because they charge higher fees). You will usually end up with underperforming proprietary funds instead of the best investments for you. You may also be provided fake financial planning that purely supports the sale of a specific product instead of comprehensive, forward-looking, real-life financial planning. This can be very expensive.
Is your advisor constantly changing firms? Advisors can make serious money by moving from one firm to another. And this is hardly ever done for a client’s best interest. It’s usually just a way for an advisor to get a fast payday from a new firm. If an advisor tells you that he or she moved once again “to do the right thing,” then the next move should have been to a true fee-only RIA. If not, beware.
I admit, I came from a Wall Street firm. And I saw it all. Advisors were constantly pressured to generate the right amount of fees and commissions for the publicly traded parent company. It was not about the client’s goals. It was all about the company’s goals.
The other Global View founders have the same story. But we got tired of being pressured to sell to our clients and not be able to offer them the very best investments. We knew there had to be a better way. So, we left and started Global View, a fee-only RIA based outside Charleston, SC.
Now, instead of selling, we provide advice. And because we are never paid by our investment providers, you can be confident that we are giving you the best investments for your specific needs.
In fact, many times, we use the same investments we suggest to our clients in our own portfolios. In other words, we have skin in the game. This is rare on Wall Street, but it helps our clients sleep well at night knowing we are invested alongside them.
The financial services industry is a confusopoly by design – the industry is structured to profit at its customers’ expense by intentionally confusing them. Sure, you probably won’t understand everything an advisor tells you – the financial services field may not be your area of expertise. But you should understand enough to feel confident that you are moving in the right direction. If you don’t, this could be a red flag that you’re actually working with a salesperson.
Financial salespeople know that they have to confuse you to sell you certain products, because if you understood, you wouldn’t buy what they were selling. And salespeople want the often-hefty commission that comes along with a sale.
Make sure you ask questions. And get the answers you want to hear. Is the advisor a fiduciary? Do they accept commissions? Do they use the same products themselves? If you don’t understand the answer to these pretty-straightforward questions, walk away.
It’s very important to ask your financial advisor how he or she is compensated. If they say their advice is free, run! No one would work for free. How does that even make sense? The truth is they are probably getting paid commissions from the firm that is pushing a specific product. And when an “advisor” works on commission, they are more than likely not working in your best interest. There’s too big of a conflict of interest.
A financial advisor should tell you that he or she is a fee-only advisor.
Fee-only advisors only get paid by their clients. They don’t accept commissions. They don’t sell you products; they give you advice in your best interest. They make recommendations that are best for you. They may look a bit pricier up front, but if you’re working with an advisor who “works for free,” then you’re probably paying several hidden fees, and therefore, paying a lot more than you think you are. And imagine if you go years without realizing this? There’s money that you never knew you were losing and the cost of finding a new advisor.
Investors should also want to work with a fiduciary. A fiduciary is legally bound to put your best interests first. At Global View, we follow a strict fiduciary standard, that you can read about here.
Unfortunately, anyone can call themselves a financial advisor. But not everyone can call themselves a fiduciary. So ask!
Do you really think Wells Fargo, for example, is working in your best interest? Or does it make more sense that advisors here care more about the interest of their shareholders?
We don’t have to answer this for you. Simply read the news. In real life, clients of these large brand-name firms report that they experience something completely different from what was advertised.
Wells Fargo is one of the few big banks to specify in regulatory reports how many products it cross sells to its customers. The latest SEC filings show the bank averages selling six banking services per retail customer household, up from just three in 1999. And it’s higher for its wealthier clients.
When searching for the right financial advisor, look for a smaller independent firm that doesn’t have to worry about a large board of directors or stockholders. Global View is a firm of fee-only financial planners based near Charleston, SC. Let us know how we can help.