How The Way Your Financial Advisor Gets Paid "Spills the Bean" on the Quality of Their Solutions
Updated: Nov 13, 2021
Choosing the right financial advisor is one of the biggest decisions you can ever make.
"Why", you may ask?
Well -- hiring a financial advisor usually means you have a challenge you feel unequipped to handle on your own.
This leaves you VULNERABLE.
So you're TRUSTING that this professional will give you honest advice and recommend solutions that will solve your challenges and maximize your financial outcomes.
Of course you would expect that your financial advisor does what's in your best interest at all times. Unfortunately, the law isn't necessarily on your side.
Your financial advisor may not have to do what's in your best interest at all times. Most advisors at most have to provide advice and solutions that are merely... "suitable."
That is all.
Suitable pretty much means, as long as what the advisor tells or sells you isn't completely out of the realm of appropriate for your situation, they have flexibility in how they present those recommendations.
Here's the trap.
Some advisors, not all, but a "significant some", use this flexibility in regulations to recommend products that will pay them more despite the cost to you or questionable quality of the solution.
So what should you do? It's simple.
Follow the money.
Have you heard of the saying "Don't bite the hand that feeds you"? We'll the "hand" that feeds your financial advisor is where their loyalty lies.
Let me put it simply. If a third party is the one who compensates your advisor when they provide financial services and products to you, that advisor is loyal to that third party and has conflict of interest. It doesn't mean they're necessarily a crook, but they do have a conflict.
That is why it's important that your advisor is a FIDUCIARY at all times.
A financial advisor who is a fiduciary is ethically, but more importantly, LEGALLY obligated to do what is in your best interest.
The easiest way to find out if your advisor is a fiduciary is to ask them this question verbatim:
"Are you obligated to act as a fiduciary on my behalf in ALL of our financial dealings AT ALL TIMES?"
The phrase "at all times" is important because some advisors will act as a fiduciary in some situations and not others. So don't accept any answer or explanation besides a flat out affirmative YES. Any other answer is them trying to explain why its "not so bad" that they're not a fiduciary at all times and is really just salesperson trickery so they don't lose business.
I don't know about you, but I want whoever is handling my money to be TEAM ME one hundred percent of the time.
Marlon is a licensed financial advisor at weshfinancial.com and is known as "The Travel Nurse Financial Advisor". Marlon specializes in helping travel nurses crush their financial goals by helping them optimize taxes, accelerate retirement savings, and maximize their investments.