Paladin began providing services to investors in 2003 when its book, “Who’s Watching Your Money?” was published for the first time. This book set the standard for vetting financial advisors to determine if they are using deceptive sales tactics to gain control of investor assets. Any financial advisor who uses deceptive sales practices cannot be trusted to provide competent, ethical financial advice. In fact, investors should avoid these advisors because they represent hidden risks that could be catastrophic. Continue reading
Stockbrokers, who sell investment products for commissions, tell investors they are financial advisors because it reduces sales resistance and improves their odds of making sales. They are breaking an industry regulation when they call themselves advisors, but the claim is verbal in a sales pitch. Investors have no record of what was said to them so the sales reps get away with it.
It is easy to recognize stockbrokers and other types of sales reps. They have two distinguishing characteristics that are difficult to hide. You just have to know the right questions to ask. First, “What licenses and registrations do you hold?” And second, “How are you compensated for your advice and services?” The advisor is a sales rep if the answer to the first question is a Series 6 or 7 license and the answer to the second question is commissions. Continue reading
In a recent Charles Schwab study titled Independent Advisor Outlook Study, 63% of advisors say it will be difficult for investors to achieve their retirement goals. The study cited a partial list of problems that included: A historically high federal debt, high unemployment, and rapidly growing college and health-care costs.
Sitting in the background are additional causes for concern such as rising longevity, the demise of the defined benefit pension plan, and low saving rates compared to other developed countries. One of the biggest issues is the rise of defined contribution plans, such as 401k, that transfer investment performance risk to employees. Many current retirees enjoy the guaranteed benefits of a pension plan. Their children and grandchildren will not be so lucky. Continue reading
Did you know there are financial advisors who read the obituary columns every day and call on recently widowed women? Or, how about the advisors who call on hospice care workers to get the names of women whose husbands have suffered catastrophic illnesses. And lastly, there are the advisors who call on attorneys to obtain the names of recently divorced women.
These sales practices win the prize for sleaze. You have to wonder how these advisors sleep at night? Or, they may sleep really well because they have control of your assets. So what is really going on here and what can you do about it? Continue reading
My own experience will illustrate the problem. I attended an investor meeting with the head of our Chicago office. We both thought the meeting went extremely well. The investor asked thoughtful questions and we had good answers. We also had a very competitive track record and charged reasonable expenses for our knowledge, advice, and services.
The Chicago manager and I were both a little shocked when we were told the investor selected a money manager in Boston. He said the firm employed five Harvard MBAs, who were also CFAs, and their track record was 10% per year higher than ours. We had never heard of this money management firm before, but wrote it off as a loss and moved on.
About one year later, there was an article in the Wall Street Journal saying the SEC had shut this firm down. The owner of the company had made everything up: The staff, the credentials of the staff, the track record, and a glossy marketing brochure that even had photos of key staff surrounded by a lot of computers. Interestingly, the fake firm was on the approved lists of several wirehouses due to its enviable track record and exceptional staff. In two years, he had amassed $330 million of assets under management working out of a spare bedroom in his home. Continue reading
For some, money is an emotional subject which they treat far differently than other important elements in their lives. For a variety of reasons, they are just not about to seek out a professional to help them meet their goals. I have never taken a psychology course, so I admit I am way out of my depth here. But I have watched investors for a long time, discussing their sometimes curious behavior with my peers, which has allowed me to make some non-scientific and intuitive observations on investor behavior.
The Control Freak
A few individuals realize how important their investments are to their future but simply can’t give up control of their finances. Either they have trouble delegating things in general, or money is such a personal, powerful, and emotional part of their existence that they reserve that activity for themselves alone. Continue reading
There is a one-page document that would stop Wall Street’s most deceptive sales practice in its tracks. Investors should ask for this document every time they select a new financial advisor. However, most investors don’t know what they don’t know. In this case they don’t know they can require the one-page document from advisors who want to control the investment of their assets.
What is Wall Street’s most deceptive sales practice? 75% of all so-called advisors are really sales representatives who are paid commissions to sell investment products. However, they are not required to disclose this fact to investors. They claim to be financial planners, financial consultants, and even financial advisors to camouflage their actual role of sales rep. Why hide this role? Investors do not want sales reps investing their assets. Consequently, there would be increased sales resistance if they knew the truth. Continue reading
You are interviewing an investment advisor who can help you achieve your financial goals – in particular, retirement goals that will determine when you retire and your standard of living during retirement. What could be more important than that? You really like an advisor’s personality and communication skills. He understands your needs and says what you want to hear when you select an advisor.
How do you know this advisor is not a skilled sales person who knows how to develop relationships and develop trust so people buy what he is selling? You don’t know and you may not know for several years when you have the benefit of 20/20 hindsight. By then it is always too late. The advisor has earned thousands of dollars of income from your assets and you have a lot less money than you should have.
How real is the problem? More than 50% of investors terminate new advisors within three years when expectations do not match what they were sold. Following are five tips that will reduce your risk of selecting the wrong advisor. Continue reading
Most investors are not aware there are financial advisors and sales representatives (reps) who have very different services, agendas, and business practices. You can blame sales representatives for the confusion. Most of them refer to themselves as financial planners or financial advisors because they know investors do not want sales reps investing their assets. If they disclosed their real status, they would lose sales.
Following are five tips that will help you quickly and easily determine who are the real financial advisors and who are the sales representatives who are masquerading as advisors. Make sure you select a real advisor by requiring documentation for the following information. Continue reading
There are three questions you should answer before you start your quest to find, evaluate, and select a great financial advisor. What are the key criteria you will use to determine the competence and ethics of the financial advisor? What documentation will you require that proves what the advisor is saying is true? If two or more advisors are of similar quality, how will you make your selection decision? Continue reading