This article describes one of the more frequent ways financial advisors manipulate track records that are supposed to document their investment performance.
There are two reasons why investors must be very cautious when they select financial advisors based on investment track records. First, advisors know most investors will select the financial advisor with the best track record. Second, unscrupulous advisors will provide fake track records or they will manipulate track record data to make themselves look better than they really are.
Track records are one way investors can evaluate competence. Reviewing advisors’ education, experience, and certifications is the other way. Given a choice, most investors are biased towards track records because advisor comparisons are easy – just select the one with the highest track record. Continue reading →
Every investor who relies on financial advisors to help them achieve their financial goals should be asking themselves how they can increase their advisor’s accountability for investment performance. Why ask the question? Most advisors go to great lengths to avoid accountability.
Here is an example. You select an advisor who convinces you to invest your assets in five mutual funds. You buy the recommended investments and you experience very poor performance over the next two years. Who is responsible for the bad performance, the funds or the advisor who recommended the funds? The advisor wants you to blame the funds so he can retain his relationship with you. He says it is not his fault the funds failed to deliver competitive performance. I disagree. The funds and the advisor who recommended them are both accountable. You should sell the funds and terminate your relationship with the advisor who sold you the funds. Continue reading →
You have seen the TV advertisements. Wall Street markets competence, trust, and services that help you achieve your financial goals. You have also seen the headlines documenting Wall Street abuses that have cost investors hundreds of billions of dollars. Which one do you believe, the ads or the headlines?
Wall Street is trustworthy or its not. I believe the headlines because regulatory agencies (SEC, FINRA, states) have documented one Wall Street abuse after another. When the most prestigious firms on Wall Street (Goldman Sachs, Citigroup) are ripping off investors you know the industry is not the trustworthy source of advice and information that its advertisements say it is. 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 →
More financial advisors are leaving big Wall Street wirehouses to go to smaller firms or start their own firms. They have a number of reasons for making the change, but most say they are fed-up with continuous headlines that document company scams and deceptive sales practices. They can’t change their firms’ business practices so their only choice is to change firms.
All advisors claim they change firms so they can provide higher quality services to their clients with no conflicts of interest. This is true half of the time. The other major reason is the advisors may make more money at the new firm, a lot more money. Continue reading →
The media calls them “alphabet soup”. Investor Watchdog’s record is reviewing the credentials of an advisor who had 28 letters after his name. The soup I am referring to is the letters that represent certifications, designations, and accreditations that appear after advisors’ names.
We are all familiar with the well-known CPA® (Certified Public Accountant™) designation. Less well known is CFP® (Certified Financial Planner™) designation. And, even lesser known is CFA® (Chartered Financial Analyst™), a very highly regarded designation that can take three years to obtain. Continue reading →
If you are working, you are saving and investing assets for your future use. The most important use is retirement years when your assets produce income that supplements payments from Social Security and company pension plans.
The more assets you accumulate during working years, the higher your standard of living during retirement years. Increased assets also enhance financial security late in life when you need it the most. You cannot have too many assets. Continue reading →
The media refers to all of the initials after an advisor’s name as “alphabet soup”. Sometimes the initials are referred to as designations. Other times they are called certifications. I am going to use certification when I refer to them. Financial advisors acquire certifications when they accumulate specialized knowledge that increases their competence. Most advisors use the initials to prove they are experts in their fields. For example, a CPA knows more than an accountant who is not a CPA.
However, what if an advisor purchased several certifications so he appears more knowledgeable than he really is? This is a major problem because the advisor is using a deceptive sales practice to get you to select him. Let’s call the tactic what it is – misrepresentation that violates industry regulations. Do you want this type of person controlling or influencing the investment of your assets? Absolutely not! Continue reading →