The title “financial advisor” implies some kind of expertise in giving financial advice. But is that really true or is it just a little bit deceptive? The fact is that just about anyone can call themselves a financial advisor if they get 70% of the questions correct on one or two tests. If they study, most people can pass these tests the first time. There is no formal education, no training, no experience, no prior knowledge required, in fact many people who take the tests began with no more knowledge about investing or financial planning than you have, maybe less. A lot of financial advisors come from jobs with non-financial backgrounds.
This is because most companies that employ financial advisors could care less if they know anything more than the bare minimum about investments and financial planning. What they care about is their ability to network and funnel people into their system. Sales drives everything, it is a tough job and only about 12% of people who take the tests and get hired as a financial advisor are still in the business three years later. The survivors are experts at social marketing.
So where am I going with this and why should you care? First, you need to know that most financial advisors are not experts in investments and financial planning. They are experts in the products they sell. They are the middlemen, and women, between their company and you. The companies train them to sell their products, they know those products inside and out and they know how to sell them to you because they sell the same thing to everyone day after day. As a financial advisor, they have to drink the Kool-Aid and believe that the products they are selling are the best when they may be very expensive for the client or may only be mediocre or in some cases downright awful products.
I am not trying to say any one financial advisor is good or bad. What I am saying is that you have to check them out and shop around; don’t just blindly trust people because of their title. Your future really could depend on it. When you rely on someone calling themselves an “advisor” there is a good chance you think they are required by law to advise you on what is best for you. This is not always true! Their advice could be more for the advisor’s benefit and their company’s benefit than yours.
Selling investment products is a relationship business. Successful advisors are super networking machines. Your advisor is probably someone you know, or you were referred to them by someone you know. They may be a someone you consider a friend. Because of that personal connection most customers just trust their financial advisor and don’t even consider the fees and costs or whether the products they are being sold are the best available.
What you need to remember is that a financial advisor may not be an “advisor” at all and anyone with a securities license can have “financial advisor” written on their business card. You tend to trust people that you know but you still need to ask questions like, “how much money are you and your company making on this recommendation”? And, “is this investment you are recommending the best investment for me or just an investment that you sell”? Question the financial advisor you have or want to work with, don’t just trust that they will do what is best for you. Then do some research. It’s your money and your future, trust if you must, but ask some questions.