by Jack Waymire
One would think that the question of What is a Financial Advisor would be easy to answer. Unfortunately, it is one of the most abused titles in America. Wall Street has turned the title into a joke because anyone can use it to sell investment and insurance products.
Wall Street employs or licenses hundreds of thousands of sales representatives. And, it knows you do not want salesmen investing your assets – in particular substantial amounts of retirement assets. How does it gain control of your retirement assets with salesmen? The answer is as simple as it is manipulative. Wall Street salesmen tell you they are financial advisors to hide their real role – selling products.
How pervasive is this practice? Just a few years ago 70% of all financial planners were actually insurance agents. These sales reps used cookie-cutter financial plans to sell large amounts of insurance products to unsuspecting consumers. There was little or no sales resistance because the plan recommended the products. Consumers seemingly forgot the salesmen controlled what the plans recommended.
Advice vs Recommendations
So What is a Financial Advisor? A real financial advisor provides investment advice and ongoing financial services. Salesmen use sales pitches to make sales recommendations. Not one investor I have talked to has ever known the critical difference between advice and recommendations. That’s because there is no difference. Wall Street deliberately obscures the difference so salesmen can masquerade as real financial advisors.
Types of Financial Advisory Services
There are four primary types of financial services. A financial advisor may provide one of the services or all of the services. Or, the advisor is part of a team that provides the services. For example, an advisor provides planning and investment services and a local CPA provides tax advice and services. The four types of financial services include:
- Financial Planning
- Investment Advice & Services
- Insurance Advice & Products
- Tax Advice & Products
Real Financial Advisors
These advisors have four key characteristics. A self-purported financial advisor is a salesman if he does not have all four characteristics:
- Registered Investment Advisor (RIA) or an Investment Advisor Representative (IAR)
- Acknowledged financial fiduciary
- Is compensated with fees for his knowledge, advice, and services
- Provides ongoing financial advice and services for the fees
Get It In Writing
There are two old sayings that should govern your relationships with financial advisors:
- Get it in writing
- Trust what you see and not what you hear
Salesmen have sales and relationship skills. They will use these skills to develop quick relationships and gain control of your assets. One of your best defenses is to require written documentation for the advisors credentials, ethics, business practices, and services. Look for information that documents the four characteristics of real financial advisors.
Salesmen do not like documentation that forces them to disclose weaknesses and predatory business practices. This is why you should require documentation. No documentation should mean no sale!
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