Three Misconceptions about Working with an Advisor

Misconception #1: “My Advisor has the answer and it always works.”

If there is a magic solution that works 100% of the time, I would love to know it. By knowing this magic solution, I can reduce my workload tremendously and assure that all my clients reach their goals 100% of the time.

Run for the hills when you come across someone that states they have the answer or have it figured out. If that person has the answer, demand to see how that strategy worked 100% of the time in all circumstances. Financial services marketing is notorious for this type of message.

Use the “too good to be true” test. It usually works.

Misconception #2:”My Advisor is managing my money.”

There are two main components to the investment process. First, you invest money. Second, you manage the investments for changes in the stock market, economy and mainly for risk.

Unfortunately, most advisors stop after the first step. In my book, that is where the advisor should start. The traditional commission based financial services industry is not a business that encourages investment advisors to manage money. Truth be told, the industry doesn’t want advisors trying anything other than a buy and hold strategy.

Think about it for a second. Commission sales are always about closing deals. Money management takes time. If an advisor was managing money, when would they have time to close deals? After all, advisors need to make a living and sales managers have quotas.

The client assumes that the money is being looked after and managed. Unfortunately, in most cases that is not the case.

I can attest to the fact that the traditional buy and hold investing, does not allow an advisor to effectively manage money. This was one of the primary reasons I went independent and away from the industry.

Misconception #3: “My Advisor is qualified to Handle My Needs.”

There is a big difference between a good sales person and a competent financial advisor. Anyone can be trained to say the right things and appear competent. In fact, I have argued that some of the biggest money managers on Wall Street probably don’t truly understand how markets work.

It takes a lot of time and dedication to be effective. Unfortunately, the sales people greatly outweigh those who are qualified to be advisors.

Degrees and certifications don’t always mean that someone is qualified. It really depends on the area of expertise. I have had many clients come to me with big financial messes that were created by very educated and certified individuals.

Take your time when choosing an advisor. Make sure they are qualified by checking references and checking performance and track records. If an advisor sounds like they are reading script when answering questions, head for the door. Someone who is qualified to be a sales person and setting sales records might not be the one you want making recommendations for one of the more important areas in your life.

Tags: Advisor, Bob Brooks, Buy and Hold, commission, Deceptive Money, financial services marketing, managing money, Misconceptions, Prudent Money, Wall Street