WEALTHBUZZ by WealthEngage

Gustavo J. Vega, CFP®, ChFC, APMA Co-Founder, WealthEngage
Gustavo J. Vega, CFP®, ChFC, APMA Co-Founder, WealthEngage

Advisors’ Dilemma – A financial advisor is having a review meeting with one of his best clients and presents her with a portfolio report with the performance of her account – along with 3 different indexes?  The client asks, “Why are you showing me the performance of so many indexes in addition to my portfolio on this report?”  The advisor tries to change the subject as he thinks to himself “because hopefully my recommendations in your account beat one of the indexes!” 

Do you feel like there is a disconnect between you and your financial advisor?  Does he or she communicate effectively?  Do you believe that they are ALWAYS acting in your best interest?  As we meet with many people looking for a second opinion, we have found that increasingly the answers to these questions are: YES, NO, and NOT ALWAYS.  

It’s important to point out that most financial advisors mean well.  They simply feel pressure to satisfy two parties that are often at odds with each other.  Those parties are:

  1. The firm they represent which sets goals and therefore influences advisor behavior
  2. Their clients which expect their advisors to make “smart” recommendations hopefully resulting in growth or income or both for their portfolios.  

Perhaps you can relate in your industry?  Your immediate boss or general company culture requires that you make “sales” to meet your production targets.  Can you see where someone may try to sell you something that perhaps isn’t what you need?  In the financial services industry, we see products come in and out of style regularly.  In the near future we will address some of these products in more detail but suffice it to say that if you have worked with an advisor for several years it is likely you have perhaps heard conflicting recommendations over time.  For example, “annuities are terrible” one year and a few years later “you should consider an annuity”! 

We can take this a step further and discuss such things as how much you pay your advisor, and do you get charged an annual flat fee in addition to an asset management fee as a percentage of assets?  However, this topic will have to wait for a future column since we are running out of space here.  

What can you do?  Work with someone who is a fiduciary.  That means that they are required to act in your best interest.  You may be thinking, “Aren’t all advisors required to act in the best interest of their clients?”  The answer is not necessarily.   Brokers and insurance agents (who frequently call themselves financial advisor) are held to a lesser measure called the “suitability standard”, which simply requires them to sell investments they believe are suitable for their clients, not necessarily what is best for the client.  A fiduciary has a legal obligation to act in the client’s best interest.  Ask your advisor if he/she is a fiduciary.  If the answer is yes, ask how much you are paying and why.  If your advisor is not a fiduciary, ask yourself if you should get a second opinion.  Always use BrokerCheck, https://brokercheck.finra.org/ to investigate an advisor’s past, licenses and credentials.  Also, learn about the firm they are affiliated to.  If they work with an insurance company or a firm that owns an insurance company, don’t be surprised if you are offered proprietary products.

Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk. Any opinions are those of the author and not necessarily those of Raymond James. The website link included is provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any third-party web site or their respective sponsors.  Raymond James is not responsible for the content of any web site or the collection or use of information regarding any web site’s users and/or members.

Connect To Your Customers & Grow Your Business

Click Here


Please enter your comment!
Please enter your name here