We all want the very best financial advice. Whatever that looks like in the real world is a separate debate. But surely a nice bit of impartial, effective and profitable input wouldn’t go amiss?
If only it was as easy as that.
Many people run scared of speaking to financial advisors simply because they are worried about receiving biased financial advice. That is, they are worried that the advice they are receiving is intended to get them to buy certain products. You know the type. Buy this really hot investment (which just so happens to give me an extremely nice kick back, thank you very much).
It’s the nature of the industry. Some advisors are paid on commission based on the fees and volumes they generate. So there’s that conflict of interest we’re only too aware of.
Because a lot of investors fear being ripped off, they choose not to get any guidance on financial matters at all. The trouble with that is, they’re missing a trick.
The game is to see what you can get out of them before you even consider handing over any of your hard-earned pennies when they try to get something out of you.
Ultimately, if you get a better sense of what a financial advisor has to offer, even if he is trying to dump a product on you, you can take advantage of this.
Here are five ways to get the most out of this type of the “advice” they have to offer.
- Understand there may be incentives hidden within the financial advice being given. If you’re not aware that it’s biased in the first place, you can’t fully appreciate what you’re getting. And once you do understand this, at least you’ll get a sense of what types of products are being actively pushed in the market, whether you require them or not.
- Facts are not the same as opinions. If something is sold as a “great buy”, it’s just an opinion and possibly one based on bias. Appreciate this. Never confuse facts with opinions in the financial advice you receive.
- And just because he has an opinion, it doesn’t mean it has value. Know the advisor’s background, training, education and experience to work out whether it makes sense to listen to the advice.
- If you are aware of incentives in place, how does the financial advice align with what goes into his wallet? Does he benefit if you stay in a product, sell out quickly or renew it? Until you have a sense of how it lines someone’s pocket, it’s harder to understand the worth of a person’s financial advice.
- Use the advisors for gathering information and helping to educate yourself. Just see them as one of many sources you can go to for ideas. You don’t have to invest based on their opinions but you can certainly learn a thing or two.
Does This Work For Me?
This isn’t a perfect model. Circumstances may dictate that you simply need to work with the person sitting across the desk from you. Maybe you’ve had enough of looking around and are just happy enough to start working with the guy with the smiliest of faces.
There’s nothing to stop you from doing so. You may even be happy to work with someone that gets paid in this manner. Get this financial planning nonsense out the way and move on, might be your thinking.
And that’s fine. Just make sure you know where they are coming from and where you are coming from / going to.
Although most of us would prefer not to work in a world of unbiased advice, taking control and making the most of any advice being offered can still be fruitful.