by Jack Waymire
If you are a millennial you may feel like you have a target on your back. Local financial advisors, stockbrokers, bank representatives, CPA firms, and online advisors constantly solicit you. You have a bewildering number of choices and making the wrong selection decision can undermine the achievement of your financial goals.
What do all of these solicitors know about you?
- They know you are busy with your career and family.
- They know there is a 95% probability you have limited investment knowledge.
- They know you do not know how to measure the competence and ethics of financial advisors.
- They know you will not commit a lot of time to learning how to protect your financial interests.
This makes you fair game for financial advisors who rely on their personalities and sales skills to convince you to buy the investment and insurance products that make them the most money. Personalities make advisors likeable and sales skills make them sound like experts, but neither have anything to do with their competence and ethics. In fact, these characteristics create a major risk that you will select the best salesman and not the best financial advisor.
Protect Your Financial Interests
You have to protect your financial interests. No one else will do it for you. The regulatory agencies do not know you exist. The financial service industry wants to maximize the revenue it generates from your current and future assets.
You want a real financial expert you can trust, not a salesman, helping you plan your financial future and investing your assets. So how do you select a real financial expert and avoid salesmen who masquerade as experts?
This relatively complex question has a simple answer that does not require a lot of work on your part. You have to take control of the process that advisors and sales reps use to sell you products that impact the amount of assets you will have for your future use.
The Simple Solution
You cannot let financial advisors control all of the information you rely on to make decisions. There is simply too much risk. Advisors tell you what you want to hear and they withhold any information that would cause you to reject their sales proposals. It is up to you to ask the right questions and know good answers from bad ones. But, we know this is not going to happen. You are too busy to commit the time to acquire this type of knowledge.
You need a simple, easy solution that gives you control over the information you use to make selection decisions. The key to this solution is documentation. Advisors prefer verbal sales pitches so you have no record of what was said to you. Your solution is factual information that they are willing to document. Their refusal to document information is your reason to reject them.
Top Ten List
There is a top ten list when you select a financial advisor who will influence or control your financial decisions. Your focus is documentation for information that describes their credentials, ethics, business practices, and services.
The ten most important types of information that you want documented are:
- Full transparency. The advisor must be willing to provide the factual information you need to make the right decision.
- Degrees from accredited colleges and universities. There are no minimum education requirements for financial advisors.
- Applicable financial service experience. There are no minimum experience requirements for financial advisors.
- Industry certifications. Use Paladin’s free Check a Credential service to validate the quality of their certifications.
- Compliance record. Avoid advisors who have a history of client complaints.
- Fiduciary status. Fiduciaries are held to the highest ethical standards in the financial service industry.
- Method of Compensation. The appropriate to pay for financial knowledge, advice, and services is with a fee.
- Expenses. You want full disclosure for every penny of expense that will be deducted from your accounts.
- Ongoing services. You need ongoing financial advice and services, not a one-time sales event.
- Performance Measurement Reports. You want monthly or quarterly performance reports that document your results.
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