Trust Me, I Am A Financial Advisor

June 18th, 2012


Should you trust a financial advisor? I was recently reading an article that referenced a survey about the degree of trust people place in different professionals. The survey was done by John Hancock. The thing I found striking was that people trust their financial advisor more than any other professional. This includes their primary doctor or their accountant. Let us get a few things straight.

Let’s review the numbers.

The survey found that 84% reported they “trust strongly” their financial advisor. Primary doctors were only “strongly trusted” by 79%, and accountants by 74%. Contractors had a 52% “trust strongly” ranking. Bosses came in at 49%, and real estate agents at 43%.

What are financial advisors and are they any different than stock brokers?

Financial advisors are supposed to give impartial advice based on the best interest of the client. Brokers sell products as a third party. Advisors are sworn to put their clients’ interests ahead of their own thanks to the Investment Advisers Act of 1940. The Act also precludes brokers from being considered investment advisors. But aren’t advisors and brokers all humans? Aren’t we all humans?

So is it human to want to earn a commission? Will you really put the client’s interests ahead of your own commission? Maybe some do. But to trust financial advisors ahead of doctors, well that is just an outrage. Some advisors act as a fiduciary, but only registered advisors are held to this standard and these usually charge a fee. Those advisors that charge a commission and are not registered only have to make sure the investment is “suitable”. Do you think Bernie Madoff followed either standard? I think its a huge assumption to think an advisor, registered or otherwise, is thinking solely of your best interests.

Why do I think this?

For a year and a half I worked inside the belly of the beast. I was a relationship manager for Wachovia wh0 was acquired by Wells Fargo in the middle of my time there. There was a team of people that interfaced with me and helped my clients. The team consisted of insurance advisors, estate planners, bankers, a mortgage team, and financial advisors. I have never been pushed with more sales goals, sales meetings, team building, cross selling and overall aggressive tactics to push product on people, ever. The financial advice business was pretty sleazy. After deciding it was not for me, I went back to the mortgage world as soon as I woke up after 1.5 years.

Financial advisors are always bullish on stocks

And did you ever meet a financial advisor that met a stock they did not like? Even when the DOW was headed down from 14,000 to near 6,000? The bottom was always near. Every time you talked to one of those financial advisors, no matter what, the bottom was at hand! It was always time to jump back into the stock market, no matter what.

But back to my own time in the financial advice world.

I got a new client while at Wells Fargo, who was a dentist that wanted help with deferred compensation plans for a large dental practice. The financial advisor I was talking to exclaimed, “awesome, that is a big ticket!” I calmly explained that we had a lot of details to talk through, and that we should talk about the client’s needs before we counted our commissions. He then said, “Yeah, yeah, sure thing, but first, how many employees do they have. And how much money are we talking?” I said that we really needed to focus on the client’s financial goals and family needs, and we could worry about the dollars later.

But the conversation went downhill fast. And don’t think that most conversations did not focus on dollars and commissions instead of client goals and family needs. So the reality is that all service professionals should be treated with skepticism. Be skeptical until they prove themselves, earn trust, and it becomes apparent that they are seeking to do what is best for you and not their wallet.

The rest of the survey

The survey also showed that 12% of investors factor in if the advisor is involved in the local community and how informative their website is in determining their trust. At 25%, being hard to contact or unresponsive was the most common reason for lack of trust in a financial advisor. Lack of personalized approach followed at 12%.

I find all of this data fascinating. To want to see information on a website and have that information help determine trust, that makes sense. Lack of responsiveness being a problem, that makes sense. But trusting financial advisors over doctors, that is just plain silly talk.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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