You want a real financial advisor who can help you achieve your financial goals. Wall Street knows this about you, but it has a major problem. Wall Street employs or licenses hundred of thousands of sales reps who are not real advisors.
Wall Street knows 92.7% of investors do not want salesmen investing their assets. Unfortunately, 65% of the 650,000 investment representatives are limited to selling investment products. The Wall Street solution is a deceptive sales practice. Any advisor can use any title that will help them sell planning and investment products:
- A planner may not have any planning experience
- A financial advisor may be a product salesman
- A retirement specialist may be an annuity salesman
Wall Street also uses a second tactic. It makes sure there no mandatory disclosure requirements for salesmen and financial advisors. They can legally withhold information from you. It is your responsibility to ask the right questions and know good answers (benefit you) from bad ones (damage you). They are supposed to tell you the truth, but the information is verbal, so there is no record of what they say. Consequently, representatives:
- May not be the investment experts they claim to be
- May have been selling used cars three months ago
- May have multiple ethics violations and personal settlements
Real financial advisors have four primary characteristics that separate them from sales reps who masquerade as financial advisors:
- They are Registered Investment Advisors or Investment Advisor Representatives
- They provide financial advice and ongoing services
- They are financial fiduciaries (highest ethical standards)
- They are compensated with fees (hourly, fixed, asset-based)
These professionals may be called financial planners, financial advisors, investment advisors, money managers, and financial consultants.
Salesmen also have four unique characteristics:
- They hold Series 6 or Series 7 licenses
- They are limited to selling investment products
- They are not financial fiduciaries
- They are compensated with commissions
These professionals may be called stockbrokers, bank representatives, or insurance agents. Unfortunately, they also use the titles of real advisors to reduce sales resistance and facilitate the sale of investment products.
You may also run into hybrids who have the characteristics of real advisors and sales representatives. For example, they might be Investment Advisor Representatives (fees) and Series 7 licensed (commissions).
You have to ask the right questions to separate sales reps and real advisors. It pays to require written responses. Use the above descriptions to determine who is a real advisor and who is a salesman using a deceptive sales practice to pretend to be a legitimate financial advisor.