Verbal Communications

One of the biggest hidden risks that impacts millions of investors is verbal communications between them and their Wall Street advisors. How big is the risk? The Department of Labor mandates written communications for pension plans because, "The investment of assets is too important to rely on verbal communications". Or, said differently, verbal communications can be wildly inaccurate because there are no records.

Sales Pitches

The foundation of verbal communications is the sales pitch. It is what advisors say to convince you to buy what they are selling. This is a major source of risk because advisors do not make money if they fail to convince you to buy. Plus, financial services may be the most competitive industry in America. Therefore, most advisors use finely honed sales pitches that give them the best odds of winning.

Deception

There are two primary forms of deception that are built-in to most sales pitches:

• Omission: What advisors don't tell you
• Misrepresentation: What advisors tell you that is not true

Examples of deception include:

• A stockbroker claims to be a retirement planner or a financial advisor
• A sales rep claims your interests come first, but he is not a financial fiduciary
• A rep claims to have no conflicts of interest, but he sells proprietary products

Accurate Information

The accuracy of verbal information (sales pitches) can be extremely low. Advisors have nothing to lose. There are three ways to improve the accuracy of their information:

• You know the critical differences between good and bad information
• You require documentation for key facts that impact your financial decisions
• You require documentation for key facts that impact the achievement of your financial goals

No Written Record

All of this happens because investors allow advisors to present critical information in sales pitches. Investors allow advisors to make undocumented sales claims. Unethical advisors take advantage of less sophisticated investors because there is no written record of what was said to them. It is the investor's word against the advisor's. Investors lose disputes because they have no documentation.

Paladin says.....

Verbal communications create a major financial risk. You risk making bad decisions that are based on partial information or misinformation. The only way you can protect your financial interests is to require documentation for critical information - for example: Advisor qualifications, realistic performance expectations, and investment expenses.