Top 10 Advisor Myths
Ten popular myths that were created by Wall Street help lower quality advisors win your trust when they compete for your assets. Knowing the realities for each myth will make you less susceptible to the risks and consequences of bad advice from advisors who lack the knowledge and ethics to provide good advice.
Myth: All financial advisors are the same.
Reality: Not true. There's a tremendous range in quality based on education, certifications, experience, services, method of compensation, compliance records, conflicts of interest, and other important criteria. This substantial range in quality creates a major financial risk when you select an advisor.
Myth: Advisors must disclose their credentials and business practices.
Reality:Not True. There are no disclosure requirements. You have to know the right questions to ask to uncover the facts about your advisor. If you don't know the right questions, there is a high probability you selected your current advisor for the wrong reasons.
Myth: Financial advisors must meet minimum education requirements like other professionals
Reality: Not true. There are no industry requirements for education, not even a high school diploma. Other professionals who provide knowledge-based services, such as CPAs and attorneys, have substantial education requirements. Financial service professionals have none because they work in a sales industry and not a knowledge industry.
Myth: Professionals must have a minimum amount of experience before they can provide financial advice.
Reality: Not true. There are no minimum experience requirements to be a financial advisor. Advisors can begin selling financial products the same day they receive their licenses. Another reality, the minimum age to be an "advisor" is 18.
Myth: Only people with clean criminal records are licensed to provide financial advice.
Reality: Not true. Individuals with criminal records can obtain securities licenses as long as their crimes weren't securities related. Although it may not be criminal, advisors with long histories of investor abuse are allowed to retain their securities licenses.
Myth: Professionals must have appropriate experience, certifications, and licenses to call themselves financial planners or advisors.
Reality: Not true. There are no requirements to be a financial planner or advisor. Any professional can use these titles/roles whether they have the appropriate knowledge or not. Less scrupulous advisors use the titles to camouflage their real intent of selling financial products for substantial commissions.
Myth: The role of planners and advisors is to help investors’ achieve their financial goals.
Reality: Not true. All advisors say that, but their principal motivation is earning good livings for themselves and their families. Then, they have to produce enough revenue to keep their jobs and pay their business expenses. Only a small percentage of advisors are willing to put your interests first.
Myth: Securities licenses mean an advisor is a competent professional.
Reality:Not true. Advisors must pass a simple test to obtain a license. Special schools can help them pass the test after a few hours of study. Licensing has nothing to do with competence. It takes thousands of hours of education and experience to become a high quality financial expert.
Myth: Professionals who work for commissions provide “free” services.
Reality:Not true. There are no free services. Commissions are paid by companies to compensate advisors for selling their investment (mutual funds) and insurance (annuities) products. This source of payment is a major conflict of interest. Plus, the real cost of the advisors' services is hidden because the product companies raise the fees they charge you to offset the commissions they paid your advisor.
Myth: Nice, friendly professionals are safe choices.
Reality: Not true. The personalities of professionals have nothing to do with competency and integrity. In fact, advisors' personality traits can be a sales tactic, because they know you let your guard down when you like someone. Then it's easy to win your trust and assets.
"Don't under-estimate the impact of the 10 myths. They are "
your biggest source of financial risk."
