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Financial Advisors In Sheep’s Clothing

December 18, 2012

In recent months I have been asked on several occasions to speak to a friend or friend of a friend regarding something to do with their investments.  They come to know that I have managed my own investments for several years and have spent the time to learn about the various investment products available and generally about how the investment world works.  I’ve done this because, in part, I found that it’s something that interests me and it’s something that I enjoy.

I do not pretend that I am a financial professional nor that I am qualified to provide investment advice to others.  My interaction with these other people is simply to listen and sometimes to offer an opinion about certain financial products, etc.  In every case they have spoken to or are already working with a financial advisor of some sort.

The unfortunate truth is that there are thousands of people in the finance industry that call themselves a “financial advisor”, “financial consultant”, “investment advisor” or “financial planner”.  A small fraction of these people are required to act in the best interest of their clients.  That’s right, most of them would most accurately be called a broker or sales person because that is their role.  And the manner in which they earn money will cause them to select investments for their client that will pay themselves the most.

This article uses the highly regarded firm of Edward Jones to illustrate how the broker dealer model works and whether they are serving the interests of their clients.  When you read this article you will see that most “financial advisors” have no background in finance.  They are trained how to find and entice new clients to offer up their money and they are given a limited set of products to sell that will generate sales commissions for the broker.  They will not tell the client that he can invest in comparable products with much lower costs.

Please read the linked article and if you currently have a financial advisor, take the time to understand exactly how he or she earns their money and if that creates a conflict with your objectives.

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From → Retirement

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