Professional or Sales Agent?  You Decide.

You’ve probably read a dozen articles that tell you how to tell a good financial planner from a salesperson or product-pusher, but the truth is, the salespeople and product pushers are so good at looking like the real thing that most articles fail to unmask the pretenders.  Not so a recent article by Liz Weston, columnist for NerdWallet, a very helpful financial website frequented most often by Generation X and Y consumers.

Weston says that brokers and salespeople will allow their customers to believe that they are required to act in your best interests, when in fact they are actually held to a much lower standard; if you need to invest, then it is “suitable” to recommend a high-commission annuity, non-traded REIT or other product which a real financial advisor, held to a higher fiduciary standard, would never consider recommending.  Weston’s first piece of advice is: if your “advisor” recommends anything other than a portfolio of low-cost, high-integrity mutual funds or ETFs, run for the exits and remember to hang onto your wallet when you do.  Also watch out for “proprietary” mutual funds; that is, funds managed by the employer of the “advisor” who is earnestly recommending them.

Weston also notes that some product salespeople claim that their services are free, or dirt cheap.  You never see the commissions that they earn, or incentive payments or other sly under-the-table compensation which actually makes the relationship much more expensive than an honest advisor relationship.  Weston notes that advisors who don’t register with the Securities and Exchange Commission as registered investment advisors, who don’t have the CPA or CFP designations after their names, should be presumed guilty until proven innocent.  Ask them if they’re willing to promise to act as a fiduciary in writing.  The Committee for the Fiduciary Standard has created a fiduciary oath that advisors can download and sign.

The key message here is that conflicted advice can cost you considerable amounts of money.  Chances are, you already knew that.  But you might consider passing on the link to this online column to your friends and neighbors:

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site:

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 


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