Top 10 Myths About Financial Advisors
Wall Street uses sophisticated marketing tactics to convince you to buy its financial advice, products, and services. One type of tactic is what advisors tell you to gain control of your assets.
There are myths (not true) and there are realities (true). As you will see, the myths create substantial risk when you select financial advisors and follow their advice or recommendatons. The more you know about myths, the better prepared you are to protect your financial interests.
Myth: Financial advisors, planners, and sales representatives are all the same.
Reality: Not true! There is a tremendous range in quality based on education, certifications, experience, services, method of compensation, compliance records, conflicts of interest, and other important criteria. This substantial range creates a major financial risk when you select an advisor.
Myth: Advisors must disclose their credentials, compliance histories, and business practices.
Reality: Not true! The financial service industry spends hundreds of millions of dollars per year on lobbyists who make sure financial advisors DO NOT have mandatory disclosure requirements.
Myth: Professionals must have a minimum amount of experience before they can provide financial advice.
Reality: Not true! There are no minimum experience requirements for advisors. They can begin selling financial products the same day they receive their licenses.
Myth: Advisors must have college degrees.
Reality: Not true! There are no minimum education requirements for advisors - not even a high school diploma.
Myth: Advisors must have clean compliance records to sell financial advice, products, and services.
Reality: Not true! Advisors can have multiple complaints on their records and still hold current licenses.
Myth: There are minimum requirements to call yourself a financial planner.
Reality: Not true! Anyone can claim to be a financial planner whether they have the necessary knowledge or not.
Myth: Commission sales representatives are required to put your financial interests ahead of their own.
Reality: Not true! Only financial fiduciaries are held to this ethical standard. Sales reps are supposed to make "suitable" recommendatons. This is a deliberately vague standard which means there are no ethical standards for reps.
Myth: Advisors who work for major companies are safer choices than advisors who work for smaller companies.
Reality: Not true! Big companies have paid billions of dollars of fines for cheating investors. Major companies have numerous, undisclosed conflicts of interest.
Myth: Advisors who are compensated with commissions provide “free” advice and services.
Reality: Not true! There is no free advice and there are no free services. Advisors are paid commissions to sell you investment and insurance products. The companies that produce the products mark-up the fees they charge you or add deferred sales charges to recover the commissions they paid advisors.
Myth: Older advisors have more financial experience than younger advisors.
Reality: Not necessarily! Wall Street companies know you assume older advisors are more experienced. Consequently, they hire older advisors to create the illusion of experience. This is a deceptive sales practice.