You might think a financial advisor is an essential part of sound investment. And there are indeed some reasons why this might be helpful. However, although this may sound counter-intuitive, we actually believe a financial advisor can be more harmful than helpful.
You might be surprised to hear this advice. But we break down the top reasons why a financial advisor could be hunting your portfolio. If you do think a financial advisor can be of help, we’ve included a few things to look out for if you’re hiring, as well.
The industry is like the Wild West.
There is no standard of training for a financial advisor. Regulations vary from state to state. This means that individuals can claim to be advisors without any training at all. That’s probably not who you want managing your retirement fund and investments.
There are thousands of different types of certifications for financial advisors out there and most often people don’t know what these certifications mean. This can ultimately end with consumers getting hurt or getting inaccurate information.
If you’re looking for a financial advisor, do your due diligence. Research different kinds of advisors and what certifications mean and always ask about an individual’s track record and background.
Many advisors have a narrow breadth of information.
Many financial advisors offer a broad spectrum of services. You might find financial advisors that market themselves as specialists in multiple areas, like bonds, real estate or risk management.
However, the truth is, one individual can’t manage the full breadth of information needed to fully advise you. At the very best, they might be an expert in a narrow piece of the pie. This means that you’re missing out on crucial information and what you’re getting will be too broad, basic, outdated and ineffective.
There’s an inherent conflict of interest.
There is always a massive conflict of interest between clients and advisors based on the nature of the relationship. This is largely due to how financial advisors get paid. Advisors commonly make money in three ways. Either from earning a commission on products, charging you an hourly rate or taking a percentage of your portfolio or earnings.
Most advisors are also tied to insurance or broker-dealer companies. This means that a financial advisor could be acting in their own interest or the interest of their employer, instead of looking at what’s best for their client.
Want to know more? We cover these tips in more depth along with some other essential drawn-backs of financial advisors on episode 20 of our podcast.
At Money Insights, we specialize in educating and working with our high-earning clients to create a plan that works for you. At the core of our work is education. That’s why we cover essential tops on our podcast each week. Start listening or visit or website to learn more about our process: https://moneyinsights.net/