{"id":8981,"date":"2018-02-20T11:43:24","date_gmt":"2018-02-20T19:43:24","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=8981"},"modified":"2022-10-12T06:28:22","modified_gmt":"2022-10-12T10:28:22","slug":"good-friends-can-be-bad-financial-advisors-beware","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/good-friends-can-be-bad-financial-advisors-beware\/","title":{"rendered":"Good Friends Can Be Bad Financial Advisors \u2013 Beware!"},"content":{"rendered":"

This happens more than you\u2019d think: Three guys are having lunch after a round of golf and they start to talk about their investments. One thing leads to another, and one of the men recommends his financial advisor. This might come as a blessing \u2013 no extra work for you; if your friend trusts them, you should too. But beware: The traits that make someone a good friend don\u2019t necessarily make them a good financial advisor. In actuality, good friends could be bad financial advisors<\/a>.<\/p>\n

As we dig deeper into this seemingly harmless conversation at the golf course, let\u2019s see what went wrong.<\/p>\n

Here\u2019s how the conversation may go:<\/p>\n

Golfer #1 isn\u2019t happy with his current advisor and tells his friends that he\u2019s thinking about working with someone else. \u201cYou should talk to mine,\u201d offers one of the friends. \u201cHe\u2019s a great guy.\u201d<\/p>\n

\u201cOh yeah? the golfer says. \u201cWhat do you like about him?\u201d<\/p>\n

\u201cHe\u2019s smart, he\u2019s funny, he really knows his stuff,\u201d his friend shares. \u201cHe\u2019s a scratch golfer and went to Stanford. You\u2019d like him.\u201d He may share old college fraternity stories and the advisor\u2019s family makeup. \u201cMy wife really likes his family,\u201d he might add.<\/p>\n

\u201cSounds like someone I could work with. Give me his number and I\u2019ll give him a call.\u201d<\/p>\n

Did you notice that the friends did not discuss the advisor\u2019s credentials or education? They didn\u2019t even talk about the types of services the advisor focuses on.<\/p>\n

In these kinds of conversations, what you don\u2019t typically hear is how long advisors have been in the business, what they specialize in or what certifications they have. All the friend finds out is that he or she is a likeable person. But many salespeople are great people too. They just might not be the person you want handling your money.<\/p>\n

Something else to consider: When people talk about their investments, they tend to share successes. Talking about their losses highlights their mistakes. When you hire a financial advisor to take care of your hard-earned money, the negatives can be just as important as the positives. The stock market might be doing very well, and the friend is earning the credit for positive investments.<\/p>\n

The sad truth is Wall Street knows that people inherently trust people they like. So they put a big emphasis on salespeople with strong people skills. Making assumptions can be very dangerous<\/a>.<\/p>\n

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