Investment Advisors (IAs) come in a wide range of knowledge, experience, and letters. They have different levels of education, from dropping out of high school to getting a PhD. They can be Accountants, Insurance Salesmen, Stock Brokers, Investment Managers, Dentists, Lawyers, TV Stars, and Gourmet Chefs. Investment Advisors can be anyone. It makes sense to put your trust in people who have a good education, hands-on experience with their own money, and don't get anything directly from the advice they give. Find a fee-only advisor who only does one job and knows how to say "NO" to keep yourself safer. Why do people want to become Investment Advisors? Call me sceptical, but I don't think it's the ethereal glow they feel after using your new Financial Plan. When you realise that IAs are the main way Wall Street's many one-size-fits-all products get to customers, you'll see that it's all about the money. There is no conspiracy here. The Advisor has just done some subtle brainwashing to make you think that his main goal is to protect your family. In reality, commissioned advisors' main goal is to protect their own families, which they do by selling Investment Products. The term "Investment Advisor" has come to mean "person who sells products," just like "Financial Planner" almost always means "person who sells insurance." Find a fee-only advisor who only does one job and knows how to say "NO" to keep yourself safer. Serious IAs have acronyms after their names and wear dark three-piece suits and facial hair. The most common ones are RIA and CFP. No matter how professional this seems, a title does not make something trustworthy for several reasons: IAs need to become RIAs in order to sell investment products legally. Most practitioners join up with big Wall Street firms to help pay for their start-up costs, and many of them get paid to promote their sponsors' products. Lastly, most advisors will stay with the same company their whole careers, always promoting the products of that company as the "best." Hmmm. Millions of shoppers (investors) are told by hundreds of companies and thousands of IAs that the product they just bought is the best thing they could have bought to help them reach their financial goals. Most IAs dance to a tune that their clients don't play from birth to death.
Wall Street has taken over the once-respected Insurance Industry over the past few years by tying Mutual Funds to life insurance and annuity products, making them far too risky to reach their once-certain goals. But the "variable products" scam is nothing compared to the recent high crimes against investors in terms of the long-term damage it could do. This one doesn't take into account the (very obvious) conflict of interest that happens when accountants sell investment products. Many professionals have more than one degree, but few do more than one thing. You need to talk to an expert. If your CPA, lawyer, or doctor (next) can make a living doing what he does best, why should he sell investment products? Greed? Hubris? And why does Wall Street let people who aren't experts sell investment products? Don't be naive. The Masters of the Universe make more money when more people try to sell Investment Products. Find a fee-only advisor who only does one job and knows how to say "NO" to keep yourself safer.
Even though the "burn out" rate for IAs is similar to that of restaurants and Mutual Fund Managers, and even though the advisory business is a cutthroat, competitive battlefield, the Financial Institutions that employ the majority of IAs grow, multiply, and make more products for you to buy with your eyes closed... because you, your products, and the management fees stay. A caring and successful investment advisor makes a good living, as they should. A successful financial institution buys other financial institutions.
On "private deals," limited partnerships, and a whole host of other speculative products and services, IAs can get paid commissions that are higher than 10 percent. On the more controlled substances, annuity commissions can be above 8%, and it's common for them to be locked up for 10 years. Mutual funds, on the other hand, give you a generous 4% to 6% whether you see them or not. Marketing fees and markups on new issues, odd-lot bonds, and other securities that don't show a commission can be quite high. What happened to each person's stock portfolio? It's a mix of ingredients that make products that take less work and make more money. Find a fee-only advisor who only does one thing, can say "no," and knows something about individual securities. This will keep you safer.
Most people need help with their investments. People with limited funds can benefit from fixed annuities. Mutual funds are the only choice in most self-directed retirement plans, which is a shame. The vast majority of working Americans invest, either actively or passively, but they don't have much time or knowledge to choose stocks and manage their portfolios. (The Democrats might win an election if they agreed to this.) But recent events show that each of us is responsible for our own money and that we shouldn't give that responsibility to a professional unless we know what the professional is supposed to know. Just because he or she works for the XYZ Fund doesn't mean much. You need a free advisor who can give you ideas instead of products and who knows about markets instead of marketing. You can find an IA who might be able to help you and herself if you are willing to ask the right questions. Try these as a starting point: You sell things, right? Do you have a list of your work that I can look at? Do you offer advice that you only charge for? How long have you been in the business of providing financial services, and is that all you do? (You don't have to teach "newbies"!) Do you work with any other companies that offer financial services? Do you have at least five clients who aren't family members who you've been advising for at least five years and who I can directly contact? Will you get paid if you put me in touch with someone? Find a fee-only advisor who only does one thing and can say "no" to keep yourself safer. Being able to say "NO" A salesman will do what you tell him to do. A consultant will tell you not to do something he thinks is wrong.
