Never Take Advice that Drives Compensation for the Advisor (Without Knowing It)
Would you ever go to a Toyota dealer and ask a salesman whether you should buy a Toyota, a Ford or a Mercedes? Of course not. The Toyota salesman is paid to sell Toyotas so we already know what his answer will be.
Life Insurance Salesmen vs. Financial Advisors
Well, then why do so many people go to life insurance salesmen and ask for a Financial Plan? Because my industry is guilty of taking advantage of people.
The word advisor seems to imply that if you talk to one you might receive some advice. Unfortunately, that’s not usually the case. Most often, the person who has the title of advisor is compensated wholly or mostly based on the products he or she sells. Telling someone to buy your product does not constitute advice in my book, but it does to the regulators of the financial industry.
Fee-Only Financial Advisors
I know it sounds crazy, but there are actually people out there to whom you can pay a fee in order to get advice that is not dependent on the product. These true financial advisors are mainly members of NAPFA, the National Association of Personal Financial Advisors and there are only about 4,000 of us compared to the 100,000 or so product salesmen.
So, if you are looking for advice that is product-agnostic and you are willing to pay for a truly independent view of your finances, checkout NAPFA.org.
One More Thing
There is no such thing as being completely void of conflicts. Even NAPFA members have their conflicts. So, be sure to understand how the compensation arrangements work before deciding to place your trust in an advisor.