I had a chance to do some thinking recently. The short version is it was the first time in four years we were able to take a family vacation. I did my best to separate myself from work, but I kept thinking about some comments I’ve seen recently from Carl Richards. If you don’t know him, I consider Carl to be one of the most forward-thinking people in the financial services world.
Now, don’t worry as these were not wild tweets. However, they did get me thinking about how the financial services industry has slowly been changing and how it can be hard to tell the difference between a fake financial advisor and a real financial advisor. Fortunately, Carl was kind enough to share some of his thoughts on the differences between them.
Fake financial advisor – What can I sell?
Real Financial Advisor – How can I help?
Fake financial advisor – What does the customer want?
Real Financial Advisor – What does the client need?
Fake financial advisor – How quickly can I write a prescription?
Real Financial Advisor – How thorough can I be in this diagnosis?
Unfortunately, advisors don’t say these statements verbatim in meetings. It will be up to you to determine whether you are being treated as a customer or a client. Here are some tips I would recommend:
- Check their record on FINRA Broker Check before signing any type of agreement. Here you can see their licenses and if there have been any complaints or charges the SEC has brought against them. This can also show you any settlements.
- Ask them to sign a document that they will always operate as a fiduciary. If they answer anything other than ‘OK’ when it comes to the topic of whether they are a full-time fiduciary, head out the door.
- Have them clarify how they are paid. Is it from product sales, a fee based on the assets they manage or a flat-fee (not many of us)?
- As a follow-up on compensation, be sure to get clarity on whether there are separate charges for investment management, preparation of a financial plan, or sale of products like life insurance. You’d be amazed how many “flat-fee” advisors have multiple income streams from clients.
- Find out how they grow their practice. You may get a response of “My clients pay me two ways. First is the fee and second is through referrals.” If you hear this, run!!!
- Be sure to get a copy of their client service schedule. Here you will see how many times you will meet with your advisor and how often you will hear from them. It is probably worth verifying if you will be dealing with the primary advisor or an assistant after that first meeting. Again, if you aren’t dealing with the same advisor every time, make a break for it.
- If it is you and a spouse, make sure you are both in agreement with choosing this advisor.
- Finally, if it doesn’t feel right then keep looking for the right advisor. It doesn’t matter if your best friend/parents/siblings/boss recommended this advisor, or you are related to them. It is your money, your future and your decision.
As I have said before, the financial services industry does its best to make this a confusing world. It really doesn’t have to be. But it is important to tell the difference between a fake financial advisor and a real one. I mean, it’s only your money😉