Financial advisors do not have any mandatory disclosure requirements – not one. It is up to investors to ask the right questions and obtain written responses so they have a written record of the advisors’ responses.
Most investors trust their financial advisors. They may even consider their advisors to be friends. They fail to recognize advisors want to be liked. Advisors know investors will tolerate bad results a lot longer if they forge a friendly relationship.
The bottom-line is advisors do not volunteer information that would cause investors to reject their sales recommendations or terminate relationships. It is not in their best interests to provide this information. And, investors who don’t know what they don’t know do not ask critical questions that impact their advisors’ recommendations and results. They have a hard time believing friends will take advantage of friends for money. Continue reading
Yes, for two important reasons.
What if you could have gone through school without taking any tests. Would you have worked as hard? No tests mean no accountability for learning the material. Unmonitored advisors are less accountable for the results they produce.
What if an advisor has two clients. One monitors the advisor and one does not. Which client is going to get more attention? The client that monitors is going to have information that may cause him to terminate an under-performing advisor. The advisor knows this. So the client that monitors and increases accountability gets more attention.
Will increased accountability improve your investment results? There is no guarantee, but increased attention certainly can’t hurt. You would hope that the more time an advisor spends on your portfolio the better your results will be.
Monitoring also provides an additional benefit. It will be easy to spot advisors who sell you products, but provide no ongoing services or advice. This gives you the opportunity to change advisors which can also improve future results.
Watchdog is launching a new quarterly monitoring service for advisors in February 2012.