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We all know (or should know) that the vast majority of financial service/product providers are looking out more for themselves and their companies; not as much for you. It really boils down to "who butters your bread?" Naturally, loyalty falls to the "butterer"! :) What are some quick ways to sort them out?
Companies and their employees do everything they can do to disguise these shortcomings. As you inquire they will duck and weave. It's natural to do so and most have specific training on how to "overcome objections". They want to look like a process-driven, transparent fiduciary, but we are rare.
1) Are they selling products and/or compensated based on transactions? They receive commission for selling (conflict-of-interest), the products are not transparent, there are hidden fees, etc. They are compensated with trips/rewards for meeting sales goals. Money drives behavior.
2) Is their first approach to be your friend? We all want friends. But if that is the foundation, be careful. You want an advisor that always tells you the truth - and they may not do that if the relationship is based solely on friendship. Seek excellence in service and process as your first priority - if friendship is also part of it - that's the frosting on the cake. Often friendship is used to hide the flaws.
3) How are they compensated? If they are paid a commission by the product, salary/benefits paid by a company - then there is a conflict of interest. If they are rewarded based on sales volume - that is a conflict of interest. As you know, money is useful but also drives behavior - and they behavior is to please the source of the money. You have to be really observant and vigilant because these are the secrets most closely held. The industry is very clever at disguising how the money is flowing.
4) Do they have written processes - actual step-by-step processes designed to lead you towards maximizing the probability of achieving your goals? Or are they trying to see which of their products is the one that fits you best therefore you are more likely to buy? The process needs to lead to your success, not theirs. Selling the product is their success.
5) Are they independent and transparent? Are they tied to products (no matter how vast the product lines)? Does their compensation lead to conflicts of interest? Do they work as a team with your other experts? Are they willing to prioritize the advice - even if it means another expert is ahead of them?
6) Are they guiding you with a written plan? A real written plan, step-by-step, prioritized that is the product of not just one expert but multiple independent expert opinions? A written plan that gets updated 1-3 times per year? A plan that is written based on your specific tangible, written goals? This criteria will weed out about 99.9% of the folks out there, sad to say.
As you have read this list you may have realized that I am describing your advisor, someone that you consider a family member that you have worked with for years.
i am sorry if I may have burst your buibble. This is not an indictment of them personally. It is an indictment of the way the industry has developed. They may be so ingrained in their world - they may not even realize there is a better way.
It is OK to feel sorry for someone that has found themselves working in one of these companies where they must sell products, meet sales goals and satisfy their boss. At the same time, that is a choice they made and that is not your fault. You don't have to do business with them out of pity. Do what is best for you and your family. You have a fiduciary obligation to yourself and your loved ones. If more did this, we would have less of them and more quality providers available.
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