Wall Street marketing creates myths (deceptive sales tactics) about financial professionals so you will buy investment services and products from lower quality advisors. There are myths and there are realities. You are better prepared to protect your financial future from bad financial advice, and bad investment products when you know the realities..
Myth: All financial advisors are the same.
Reality: 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: The financial service industry does not have any minimum education requirements for advisors, not even a high school diploma. Wall Street puts more emphasis on sales skills than financial knowledge because sales skills produce revenue.
Myth: Professionals must have a minimum amount of experience before they can provide financial advice.
Reality: There are no minimum experience requirements for advisors. They can begin selling financial products the same day they receive their licenses.
Myth: Advisors are required to disclose information about their credentials, ethics, and business practices.
Reality: There are no disclosure requirements. Most advisors use sales skills to tell you what they think you want to hear and hide information that negatively impacts their sales success. You have to ask the right questions to uncover the information you need to select a high quality advisor.
Myth: Only people with clean criminal records are licensed to provide investment products.
Reality: Individuals with criminal records can obtain securities licenses as long as their crimes weren't securities related. Although it may not be criminal, advisors with long histories of investor abuse are allowed to retain their securities licenses.
Myth: Anyone who calls him or herself a planner must have the appropriate experience and certifications.
Reality: A high percentage of "planners" are sales representatives who use the title and bogus financial plans to help them sell investment and insurance. They know most investors do not question the recommendations of their financial plans.
Myth: Advisors are investment experts because they hold securities licenses.
Reality: The licensing process is more about understanding industry regulations. Licensing does produce financial expertise. That takes years of experience and thousands of hours of study.
Myth: Advisors who work for major companies are safer choices than advisors who work for smaller companies.
Reality: Big companies have paid billions of dollars of fines for cheating investors. These companies have numerous, undisclosed conflicts of interest. You should pay more attention to the qualifications of advisors and less to the company that employs or licenses them.
Myth: Advisors who are compensated with commissions provide “free” advice and services.
Reality: There is no free advice and there are no free services. They are paid commissions to sell you investment and insurance products. The companies that produce the products mark-up the fees they charge you to recover the commissions they paid the advisors.
Myth: Older advisors have more financial experience than younger advisors.
Reality: 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. Do not equate age to experience.
