By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | July 23, 2009 | Deceptive Sales Practices

In a recent conversation with a distraught investor, we will call him Paul, we discussed the horrific investment results he experienced since the fourth quarter of 2007. Even with the partial recovery of the market from a low of 6.500, his investments are still down more than 63% from the market top. Paul is devastated because he will have to delay his retirement for at least five years – his losses were that catastrophic.

Paul attributes his results to the incredibly bad advice he received from a financial advisor in Chicago. Although it was tough for Paul to admit, he finally told me he selected the advisor for two primary reasons. First, he thought all advisors provided similar services so it didn’t matter who he selected. Second, this person was located only two blocks from his office. He thought location would make meetings and communications more convenient. 

Weak advisors would like you to believe it doesn’t matter which professional you select because it makes them more competitive against stronger advisors. Nothing could  be further from the truth. There is a huge range in the knowledge of advisors based on education, experience, certifications, association memberships, and other criteria that impact competence and results.

The advisor used sales tactics a second time to make proximity an important buying point for Paul. The advisor’s motive was to eliminate stronger competitors who were further away. Paul fell for it. He didn’t know it, but he traded convenience for competence and ethics. Proximity should not enter into your advisor selection decision – especially if the advisor is willing to meet at your location. 

Paul is paying dearly for his misperception about advisor quality and the emphasis he put on convenience.