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Beware The Honest Salesperson
Who do you think has the potential to do more damage; a salesperson who does not care about the welfare of the people he sells to or a salesperson who cares but makes mistakes due to a lack of knowledge and the system he operates under?
I have met and spoken with many financial advisors during my time in the financial services industry. There are many good, well-educated advisors truly working to help their clients in meaningful, positive ways. There are some very bad advisors who do not have any interest in helping people, but are only concerned with lining their wallets and increasing their own investment accounts. Then there are the well-intentioned advisors, those who do really want to help people but are placed in a system which makes it difficult for them to do so. Additionally, many of these advisors do not have the training or experience to recognize the conflicts and the frequent bad financial advice they dispense. It is these advisors who I fear do the most harm to clients in the long run.
I believe the frauds will eventually be exposed. They will dupe a litigious client who makes certain of that. Or they will run afoul of regulators under who's jurisdiction they fall. Many people will intuitively recognize these people to be dishonest and self-interested. Some people will be hurt by their actions, but eventually they will be stopped by one means or another.
The well-intentioned advisor who works for a sales organization is who I truly fear. These people want to help; they want to provide good service and impact people's lives positively. When they meet with people they can speak with sincerity and conviction because they believe what they say. They will tell clients that they are able to manage their conflicts of interest and mean it. They will inform their clients that they are not bound to only sell company product. They will be honest when they say these things. However, due to a lack of experience in different business models or training in financial advice, many of them will ultimately provide bad and wrong financial advice.
In my brief stint with a large insurance company, I was assured on several occasions that the way we operated was the same as every other firm, whether a small financial planning firm or another large financial services company. I was informed that the "boutique" fee-only firms were still sales organizations. I think the people who told me this truly believed it. They did not know any better having never experienced working in a professional, fiduciary financial planning firm.
I was also told to try to help my clients, but then reminded to not forget about my sales quotes and the benefits and incentives riding on meeting those quotas. I was required to attend seminars discussing the benefits of variable annuities and they ways they could help virtually all people, with little focus on the costs. The system, it seems, was designed to make me believe that I was giving good financial advice and trying to help clients even while I was selling expensive and possibly inappropriate products. I did not know what I did not know.
There are many other financial advisors in the same situation. They are well-intentioned, helpful individuals. They may have a deep desire to give you good financial advice and will be very authentic. They will not mean to harm your financial well-being, but there is a good chance that will happen anyway.
I believe you can find very good financial advisors in large insurance and financial services firms...I have met some. But the deck is stacked against you. Between the outright frauds and the well-intentioned advisors, you may find yourself working with someone who actually harms you. Working with an independent advisor is no guarantee that you work with a good financial advisor. You can still find the frauds and well-intentioned advisors here, but you increase the odds in your favor.
In the financial services industry, you need to increase the odds in your favor. There are so many forces working against you, you cannot afford to increase the risk that your financial advisor works against your financial well-being, whether they do so intentional or not.
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3 comments:
Not only is the deck stacked against clients when trying to find an honest, conflict-free advisor, the odds are also stacked against the advisor trying to do the right thing and take care of the client from within a large financial services organization.
It can be done, but it is becoming more and more rare to find an intentionally ethical advisor who can put the client's interest 1st even when they're the employee of a Wall St. firm or mega-insurance agency.
So, Nathaniel, who or what entity do you represent regarding providing insurance, financial planning?
Sunny aka @suns39/twitter
I do not represent any firm right now, Sunny. This allows me the freedom to write much of what I do. Thanks for reading and commenting.
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