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.
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