I know damn well this post is going to be controversial, but I also know that the opinions I will share aren't mine alone. The majority of people I speak with see the same issues, but no one has any idea what to do about it. All I can personally do at this point in time is write about it and share the knowledge I've gained. I don't consider myself a Financial Advisor. I consider myself an educator and have built my business model in a very transparent way that focuses on providing education and resources to my clients that don't involve selling any additional services or products. We need more educators in this country and less salespeople helping you to deal with your money and investments, and please don't settle for less.
So, what exactly is a Financial Advisor? And what exactly are they going to do for you? And what exactly should they be doing for you?
Here is the definition according to Investopedia:
DEFINITION of 'Financial Advisor'
One who provides financial advice or guidance to customers for compensation. Financial advisors (or advisers) can provide many different services, such as investment management, income tax preparation and estate planning. They must carry the Series 65 license in order to conduct business with the public. A wide variety of licenses are available for the services that a financial advisor can provide.
INVESTOPEDIA EXPLAINS 'Financial Advisor'
'Financial advisor' is a generic term with no precise industry definition, and many different types of financial professionals fall into this general category. Stockbrokers, insurance agents, tax preparers, investment managers and financial planners are all members of this group. Estate planners and bankers may fall under this umbrella, as well.
Basically, a Financial Advisor, according to Investopedia, is someone who carries a license to be able to sell securities (for example, a stock broker). How exactly does that make any sense that an advisor MUST be a stock broker? Do you see where I'm going with this? Your only option is to invest in securities? In the time I was at Morgan Stanley, I received ZERO, and I repeat, ZERO training regarding creating budgets, dealing with taxes, real estate investment, money market, CD's etc. ZERO. The only training we received was in SALES, and building a business plan to influence your network of high wealth individuals to buy into a stock portfolio. The HUGE thing they were pushing was annuities. Guess why? Because they provided for the biggest $$ for the advisor. And they scared you into "not making it" if you don't sell enough. There is something SERIOUSLY wrong with that picture. If your advisor's expertise is soley on the stock market, be careful.
I know that this is the norm and not just what I specifically experienced. I know an astronomical amount of people who heard from their advisors all the time prior to handing their money over, and afterwards have a hard time getting in touch with them unless they want to invest more. I go back to telling you, they are STOCK brokers, not overall advisors. Why? An advisor should be helping you make decisions on the big picture, on anything and everything in your life that involves your money. This is not and should not be limited to the stock market and insurance. A stock broker and the products they sell may be a part of your overall portfolio and financial plan depending on your own personal circumstances, but they should not be considered your complete solution.
I get asked the question of what exactly (securities/commodities/insurance/retirement/real estate) someone with X amount of money should invest in. In my opinion a financial advisor who "sells" you on any particular product, especially a higher risk product should raise red flags for you. If you have a financial advisor who spends more time telling you what to do and creating some amount of fear rather than educating you on what options are available; what an ROI look like, what's happened in the market, where to find resources, teaching you about risk tolerance etc - then MOVE on. Most advisors have to meet a certain numbers of sales in order to keep their jobs (especially at places like Morgan Stanley, Merrill Lynch, Northwestern) which is the biggest reason why they push such risky products. It's an inherent issue with the way the business model is set up that attracts and breeds salesmen acting as advisors. I urge you to please be careful who you trust with your hard earned money and to not shy away from the option of talking with someone at a local credit union, salaried bank employees who don't stand to make large commissions or someone that doesn't stand to gain much from your investment. Transparency is key. The best advice I can give is find someone who will educate you on all your options and the risks and rewards to be expected.
I hope one day soon, the US will create better regulations for the financial services industry that protects the every day American instead of takes advantage of them. But for now, just be aware (and beware)!