Financial advice is supposed to be suitable if your provider is a stockbroker and in your best interests if your advisor is an Investment Advisor Representative (Financial Fiduciary). The regulations do not say the advice you receive has to be competent. This would be a stretch for an industry that has no education or experience requirements for advisors. In fact, the minimum age to be an advisor is 18 and convicted felons can obtain securities licenses. This is the industry that wants to invest your retirement assets. Continue reading
An advisor is a Registered Investment Advisor or an Investment Advisor Representatives. These are the registrations that permit them to provide financial advice and ongoing services for fees.
As you might imagine the only method of compensation for fee-only advisors is fees. These professionals do not receive any form of commissions from investment or insurance companies. Continue reading
Wall Street is a marketing powerhouse. It knows how to manipulate investors for its own benefit. No matter how smart and sophisticated you think you are, all of those PhDs on Wall Street are smarter.
One popular Wall Street tactic is to blur differences to benefit itself. For example, can you tell me the difference between investment “advice” and investment “recommendations”? Would you believe there is a huge difference?
Investment advisors who are Registered Investment Advisors or Investment Advisor Representatives can provide financial “advice”. Stockbrokers, who hold Series 6 and 7 licenses, are not allowed to provide investment advice. They are limited to making investment “recommendations”.
If you want a real advisor you have to select a professional who is a Registered Investment Advisor or an Investment Advisor Representative.
According to the dictionary a fiduciary is a person who holds a position of trust. In the financial services industry a fiduciary is a professional who is a Registered Investment Advisor or an Investment Advisor Representative. These registrations permit professionals to provide financial advice and ongoing services for fees.
Fiduciaries are required by law to put client interests ahead of their own. This is the highest ethical standard in the financial services industry.
What about the hundreds of thousands of non-fiduciaries who sell financial products? They are held to a lower ethical standard called suitability. This deliberately vague standard varies by client. What is suitable for you may not be suitable for your parents.
The key to understanding these messy definitions is the limitations that are placed on the non-fiduciaries. They are limited to selling investment products for commissions. Only fiduciaries can provide financial advice and services for fees.
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.