You have filed your taxes! (We hope you have filed your taxes.) You have a tax refund to play with! Or you’ve just determined that you need a retirement plan other than saving for take out food. Enter the financial advisor.
Financial advisors exist to help with your money. However, they also operate in a system that is designed to maximize profits, and that includes collecting any fees that you might pay. In other words, they often need to take care of themselves before they take care of you. Learn how to choose the right financial advisor in Unshakeable: Your Financial Freedom Playbook.
According to the Wall Street Journal, there are more than 200 different designations for financial advisors, including “financial consultants,” “wealth managers,” “financial advisors,” “investment consultants,” “wealth advisors,” and (in case that doesn’t sound exclusive enough) “private wealth advisors.” These are all just different ways of saying “I’m respectable! I’m professional! Of course, you can trust me!”
90% of financial advisors are just brokers. They’re paid to sell products to customers.
Regardless of the title, what you really need to know is that 90% of the roughly 310,000 financial advisors in America are actually just brokers. In other words, they’re paid to sell financial products to customers like you and me in return for a fee.
Why does this matter? Because brokers have a vested interest in hawking expensive products, which might include actively managed mutual funds, whole life insurance policies, variable annuities, and wrap accounts. These products typically pay them a onetime sales commission or, even better (for them), ongoing annual fees. A broker at a major firm might be required to produce at least $500,000 a year in sales. So it doesn’t matter how fancy the title sounds: these are salespeople under intense pressure to generate revenues.
42% of ultrawealthy clients think their advisor is more concerned with selling products than with helping them!
Check Out the Advisor’s Credentials.
You need to make sure that the financial advisor, or someone on her team, has the right qualifications for the job you need done. If you’re looking for planning help, make sure the advisor has a certified financial planner (CFP) onthe team. If you’re looking for legal help, make sure there are estate planning attorneys on the team. Looking for tax advice? Make sure there are CPAs on the team.
Make Sure Your Advisor Has Experience in Working with People Just Like You.
Does she have the track record to prove she’s performed well for clients in your position, with your needs? For example, if your main focus is on building wealth so you can retire, you want a real expert in retirement planning. Yet in an anonymous survey, the Journal of Financial Planning found that 46% of advisors had no retirement plan of their own!
Does this mean they’re dishonest? Not at all. But it does mean they’re working for the house. And remember: the house always wins. Sophisticated customers know this is standard operating procedure.
These are just several invaluable tips from Tony Robbins. If you want more of the good stuff, you’ll have to find his new book Unshakeable: Your Financial Freedom Playbook. Please file your taxes before finding a financial advisor, at least for this year. These 10 books will help you whip your finances into shape.