Why is a Bogus Financial Planner so Difficult to Identify?

Posted on February 22, 2013 by Jack Waymire

You need to know there are real financial planners and there are bogus financial planners. The fake planners use the title to reduce sales resistance when they sell investment and insurance products. For example, a plan may recommend a substantial purchase of insurance products. You are more likely to buy if it is recommended by the plan and not by the financial planner. What is the difference? There is no difference when the plan represents the financial interests of the planner.

Industry Regulations

There are no industry regulations that limit who can call themselves financial planners. A brand new sales rep may adopt the title to facilitate the sales of financial products. There are no tests to make this claim more valid and there are no licenses for financial planners. If you are asking why, it is because Wall Street firms also benefit from this deceptive sales tactic. The firms make more money when they make it easy for their reps to sell investment products and services. And make no mistake. Wall Street has tremendous influence over the regulations that govern the industry. Continue reading →

Wall Street Fights Higher Ethics Standards for Stockbrokers

Posted on December 13, 2012 by Jack Waymire

Prior to 1975 stockbrokers were called Customers’ Men. Their role was to help clients achieve their financial goals. They did this by performing duties that in modern times are provided by money managers. For example, they helped clients develop strategies and build portfolios. They recommended investments based on company research. And, they bought and sold securities for their clients.

This hundred year-old relationship changed when trading commissions were deregulated. The new regulation created discount brokers and severe price competition between established firms. Stockbrokers could no longer make the money they were used to so they had to change their role. They became salesmen whose primary role was to sell investment and insurance products (mutual funds, annuities) to their clients. They were and still are compensated with commissions that are based on the amount of products they sell. Continue reading →

Why are Investment Surrender Charges so High?

Posted on October 19, 2012 by Jack Waymire

First of all, sales reps say you will never pay the surrender charge or penalty for early withdrawal because you intend to hold the investment for at least seven years. That is true on the day you buy the investment – you have no intention of selling it that day. But, it is not true one year later when you determine the investment product (mutual fund, annuity) is under-performing and charging excessive fees. You determine you could do a lot better elsewhere, but you have to pay a 6% penalty (one year has elapsed) to move your assets.

Why are surrender charges just a big number? As you may know, investment product companies still pay the sales rep a 5% commission even though the assets are not deducted from your account. In effect, the product company is front-ending the commission payment to the advisor. The product company needs time to recover the commission payment. Most of the reputable companies charge early withdrawal penalties for seven years. They have that length of time to recover the commission payment and they are protected by the surrender charge if you decide to leave early. Continue reading →

The Compensation Methods of Financial Advisors Matter a Lot!

Posted on October 18, 2012 by Jack Waymire

Savvy investors do not buy investment products from sales representatives (reps). They select “real” financial advisors who have the specialized expertise and services they need to help them achieve their financial goals. This is a far cry from reps who want to sell mutual fund products that pay 5% commissions. Regardless of what reps say in their sales pitches, astute investors should know reps, who are paid at the time of the sale, have no economic incentive to help them achieve their financial goals.

If you are a savvy investor you should pay fees to a financial advisor for his knowledge, advice, and services. If you become dissatisfied with the advisor’s results you can terminate the relationship and the advisor’s compensation stops. This is a powerful incentive that motivates advisors to help you achieve your goals. Continue reading →

Boomers and Gen X’s May Be in Serious Trouble

Posted on October 11, 2012 by Jack Waymire

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 →

Looking for Help on How to Trade? Make Sure the Advisor Puts Your Interests First!

Posted on October 9, 2012 by Jack Waymire

In the good old days, there was a straightforward relationship between investors and stockbrokers who were paid commissions to help investors trade their portfolios. They recommended stocks for purchase and sale based on input from analysts that worked for their firms.

That whole model fell apart in 1975 when brokerage commissions were deregulated. This change spawned a new type of firm that was loosely described as a discount broker. Then, when you needed help on how to trade, you had a choice: the traditional full service brokerage firm or the new upstart discount broker. Continue reading →

5 Reasons You Want an Advisor Who is an Acknowledged Financial Fiduciary

Posted on July 24, 2012 by Jack Waymire

Wall Street does not want you to know there are two primary types of people who sell financial advice and services. One is a sales representative (rep) who is limited to selling investment products for commissions. The other is an advisor who provides financial advice and ongoing services for fees. Wall Street knows you do not want sales reps handling your assets, so it does everything it can to obscure the key differences between reps and advisors.

You can avoid many of Wall Street’s shadiest business practices if you select a professional who is a financial fiduciary. Following are five reasons why this is true. Continue reading →

Do I Have a “Real” Financial Advisor?

Posted on November 13, 2011 by Jack Waymire

A Watchdog visitor questioned whether the person providing him with financial advice was a real advisor. He thought the person was an advisor, however a business associate told him the person was really a sales rep.

He should be concerned. If the person misrepresented his role, then his financial advice may also be tainted.

Very few consumers would be comfortable knowing a sales rep was influencing or controlling their investment decisions. However, this is why reps misrepresent roles. They want to minimize sales resistance and maximize incomes.

How do you know the person advising you is a “real” advisor? Ask three questions and make sure the person responds in writing. Do not accept verbal responses. You want a written record.

What licenses or registrations do you hold? Sales reps hold Series 6 or Series 7 licenses that limit them to selling investment products. Real advisors are Registered Investment Advisors or Investment Advisor Representatives that permit them to provide financial advice and ongoing services.

How are you compensated? Sales reps only method of compensation is commissions. Real advisors are paid with fees or commissions, but primarily with fees.

Are you willing to acknowledge you are a financial fiduciary in writing? Advisors will answer Yes. Sales reps will answer No. Fiduciaries are held to the highest ethical standards in the financial services industry.

Remember, get the responses in writing. When it comes to your assets, trust what you see, not what you hear.

“Real” Financial Advisor or Sales Representative?

Posted on October 26, 2011 by Jack Waymire

Several investors have asked me for easy ways to determine if the professionals advising them on their investments are “real” financial advisors or sales representatives masquerading as advisors.

These investors have a valid concern. Sales representatives frequently market themselves as advisors because they know investors do not want salesmen investing their assets. If they told the truth about their actual role (selling investment products) they could lose the sale.

Following are three easy ways to recognize the type of person advising you on your investments.

First, “real” advisors are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs). If your advisor is not an RIA or IAR you are following the advice of a sales rep.

Second, “real” advisors are willing to acknowledge they are financial fiduciaries. This is the highest ethical standard in the financial service industry. If your advisor is not willing to provide this acknowledgement in writing you are following the advice of a sales rep.

Third, “real” advisors are compensated with fees for their knowledge, time, and services. If your advisor’s only method of compensation is commission, you are following the advice of a sales rep.

BofA Merrill Adding 2,000 Brokers

Posted on February 3, 2010 by Jack Waymire

The Financial Times reported BofA Merrill Lynch plans to hire 2,000 brokers over the next 12 months. They will hire inexperienced brokers rather than pay big upfront fees for established professionals. These brokers will market investment products to BofA’s 17 million mass-affluent customers who need wealth management services.

Alois Pirker, research director at Alte Group LLC thought this was a smart strategy, “If you don’t leverage the opportunity, you might as well split (BofA and Merrill) up again.”

I have a different take. BofA has developed a relationship with its customers delivering traditional bank services and not investment services. Now it wants to generate more revenue from these relationships – Mr. Pirker called it “leverage the opportunity.”

Leveraging relationships is good for BofA and bad for its customers when it adds 2,000 newly minted brokers to sell bank, investment, and insurance products. In my opinion, these brokers should come with the following warning label: “I am a brand new broker. I don’t know how to help you achieve your financial goals. But, I have been trained to sell you bank products.” This is not wealth management; this is product sales disguised as wealth management.

This is a common bank strategy. Build trust with traditional bank services and then use the trust to sell investment and insurance products. BofA customers beware. Make sure you ask brokers for documentation that describes their experience and other sources of investment expertise before you buy what they are selling.

Category Archives: Sales Representatives