Financial advisors do not have track records because the industry does not want them to document their results for two reasons. First, most advisors are paid to sell you investment products. They are not paid to produce competitive returns for your assets. And second, if they had track records, most of them would not be very good.
Consider yourself lucky if your advisor's recommendations helped you achieve your financial goals. This statement may sound a little extreme, but it is accurate. Even incompetent advisors can look like geniuses in Bull Markets.
Advisors say they don't have track records because their clients have different needs. There is some validity for this claim because advisor services can vary by client. However, unscrupulous advisors take advantage of this vacuum when they use hot products to create fake track records that they market to gullible investors. This is a Four Part investment scam.
Part One of the scam is to identify mutual funds with exceptional track records. Because there are thousands of funds, there are always some that are delivering high returns even in relatively adverse market conditions.
Part Two of the scam is for advisors to tell investors they have been recommending these funds to their clients for as long as the funds have been producing the exceptional returns. They know you have no way to determine when they started recommending the funds or if they really recommended them.
Part Three of scam is to use the hot funds to establish a three to five year track record for the results that advisors say they produced for their clients. The strategy is also used to reinforce the perception that this advisor has extraordinary knowledge that enables him or her to identify high performing funds "before" the results actually occur.
Part Four of the scam is to use friends and associates as references who are coached to tell you the advisor has been recommending the hot funds for long periods of time. This tactic is designed to reinforce the belief that the advisor has exceptional foresight.
This misrepresentation is a scam that borders on investment fraud. The advisor's intent is to gain control of your assets based on his ability to identify hot funds "before" the performance occurred. The reality is he selected the funds "after" the performance occurred. Anyone can do that. Then the advisor created a deceptive sales pitch and process to convince you his claims were real.
Millions of investors have selected advisors based on this misleading sales pitch and suffered the consequences. It pays to remember hot products are not track records because you do not know when the advisor started recommending the products.
