Not All Financial Advisors Are Created Equal
When most people think of the profession of Financial Advising, they generally think of one thing: Salesman. They think of a person or company who is trying to get them to buy insurance, invest money in certain funds that pay high commissions, or otherwise actively manage their money. They think of the industry as being an unnecessary use of money run by individuals who are only out to line their own pockets. Unfortunately, this is true in many instances, but it is not always the case.
Like any industry or profession, there are good and bad people. Not all doctors charge for services while only giving patients a placebo rather than actual medication. Not all contractors will take a deposit, start the job then disappear. Not all mechanics will tell you that you need unnecessary repairs because they think you you do not know any better and will believe them. The same holds true for financial advisors, and in fact, some financial advisors do not sell anything at all other than services and results!
Many financial advising firms do not deal in the sales of any products whatsoever. No insurance, no annuities, no funds, no investment products of any kind. Many are started for the express purpose of helping people reach a particular goal or educating people on how to better handle their finances. It is not always about sales and commissions, but rather transferring knowledge and building relationships based on trust.
What’s more, it is important to realize the impact true, independent financial advisors may have had on the housing crash. Had many of the would-be homeowners consulted with a financial advisor, or financial planner, they may have had a better idea as to what lay ahead in terms of hidden costs of maintaining a home, real estate taxes, and even what to expect if there was an adjustable rate mortgage (ARM) involved. The advisor may have been able to create projections for varying scenarios to give the client a better idea of what the mortgage cost would be once the rate adjusted.
With regard to debt-management, a financial advisor can provide a more objective plan, especially when one considers all of the shady debt-resolution companies laying in wait to take advantage of unsuspecting and emotional consumers. Independent financial advisors work with clients to get their liabilities in order and formulate a plan to pay down that debt. They also can teach clients how to develop a budget, and to compensate for changes in economic conditions, whether personal or nationwide.
More than anything a financial advisor can act as a confidant, particularly when the topic of money is either a taboo one in their family, or they are just too ashamed to talk to their friends and/or relatives about their troubles. Many do not charge for an initial consultation, and some (like my own company GreenBridge Advisors) do not charge for simple conversations to ease their clients’ minds or to explain something they might not be too familiar with or understand.
No matter what you may hear about a particular person or company within an industry, it is important to realize that one person/company/incident does not represent an entire industry. Just because some people do not feel the need to seek paid, independent financial advice, that does not mean that all people do not need it. After all, it may just save you from financial disaster.
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December 29th, 2008 at 8:32 am
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
December 29th, 2008 at 9:18 am
Thank you Mr. Taylor. I certainly appreciate the feedback, and look forward to providing interesting content for as long as I possibly can.
December 29th, 2008 at 12:45 pm
I personally find that the best financial advisors are the ones that are brutally candid. I hate when someone tries to sugar coat something or that tries to sell me some lame investments. I have enough background information that I feel I can not be lied to. So when someone tries to lie to me I take it as an insult.
December 29th, 2008 at 1:13 pm
Personality fit is often an over-looked factor. You want to make sure that you share the same basic philosophies with your planner. For example, if your planner is going to insist that you cut out your lattes each day, but you find them to be a $3 slice of heaven, you may not agree on larger issues either. A particular planner could be great for your best friend, but maybe not best for you. Look for one who can cater to you!
December 29th, 2008 at 1:39 pm
@ Studenomics:
I completely agree. As you can see from my writing I do not believe in coddling or sugar-coating anything. I always tell my clients when they need to take accountability for their actions, and that in most cases it is their own decisions that led them to the place they are currently. This also works for clients who are exceeding their goals; I tell them that it is thanks to no one but themselves and their own desire and determination.
As far as the investments go, I don’t even touch them. I sell nothing but my services–no insurance, stocks, funds, annuities. It is my preference to educate clients to the point of being able to make up their own minds when it comes to investments. I do assist in doing the research: helping them understand what the financial statements mean and how to read them, pointing them toward the different ratings guides, and advising them on the different brokerage houses based on their needs.
December 29th, 2008 at 1:46 pm
[...] More [...]
December 29th, 2008 at 1:54 pm
@SF:
That is one of the things that a potential client should research during the initial conversation. Personally, I’m not that interested in “tricks” for saving money like playing games with envelopes or cutting out soft drinks at a restaurant. So, like your latte example, I would not be the best person to consult if you want to be cheap and count every penny. I believe that people should spend their money on what makes them happy as long as they can afford it since they worked hard enough to earn it and there’s no sense in putting all away for a day that may never come. A couple older posts I wrote that hit on your points are:
What makes for a good financial professional?
Financial advice is not a one size fits all proposition
December 30th, 2008 at 1:34 am
Not All Financial Advisors Are Created Equal…
When most people think of the profession of Financial Advising, they generally think of one thing: Salesman. They think of a person or company who is trying to get them to buy insurance, invest money in certain funds that pay high commissions, or othe…
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