| |
The vast majority of the financial
services industry does not have your best interests at heart. It is
more concerned about the money it makes, not the returns investors
receive. Read on to hear what an agent himself has to say—it may
shock you.
When you work in the brokerage, financial planning and insurance
industries, it is all about sales. The training, the incentives and
the pay structure are all designed to motivate the advisor to SELL.
Their success in the industry is not based on how well their clients
do, but on how much commission is generated.
I’m not against people making money. The workman is worthy of his
wages. The problem is that it’s the individual investor who turns to
the industry for help that ends up paying the price. Investors need
to be skeptical and cynical when dealing with an advisor—especially
one that is paid on commission. Reading actual quotes from an
advisor’s email I received will give you an insider’s look into the
industry.
The financial industry attracts those that are good at selling and
want to make a lot of money. This advisor who emailed me calls
himself “very aggressive” and a “grey haired 34-year old hustler.”
“I’m a natural sales whiz and have found this biz very easy to
succeed in. I’ve never made less than $200,000 in commissions [per
year] since entering the biz 4 years ago.” Believe it or not, he was
saying these things trying to impress me!
Here are his comments about Equity-Indexed Annuities (EIAs)—an
investment that I have been warning investors about for over a year.
“I have only been selling EIAs because I am not full of [investment]
options.” In other words, it is one of the only ‘investments’ he can
offer.
“I am more than happy to get $50,000 [invested by a client] all day
long at 10% commission.” The agent makes $5,000 a pop. What’s the
client make? Who cares! He goes on, “I realize there is a better way
for …my clients.”
“Have I thought EIAs may not be as great as other alternatives? YES.
[his emphasis] Obviously, if I get 12% commission it comes from
somewhere and it’s not the carrier.”
The clients of this ‘advisor’ don’t realize his true motivation.
They expect him to be knowledgeable and have access to a broad range
of products, but he isn’t and he doesn’t.
How does this affect you? This could be the advisor that you are
talking to! This could be the advisor that was such a great speaker
at that free seminar you attended. This could be someone you thought
was a financial genius when in reality all that he/she has done is
learned a good sales pitch!
Most advisors aren’t as open about their motivations as this one
was. Some advisors sincerely believe that equity-indexed annuities
are a great investment. Only God knows how much their opinion stems
from the outlandish commissions they’ll receive.
Not all advisors are like this. There are some that are willing to
take a stand and do what is in the client’s best interest even when
it means the advisor will make less money. They realize they can’t
accomplish this working within a commission-based compensation
structure.
They’ve left the big brokerage firms and work for themselves. This
gives them freedom and control over the recommendations they make
because their job security isn’t based on meeting sales production
requirements. These advisors are paid a fee for their services
instead of a commission.
By the way, it takes a fee-based advisor 7-10 years to make what the
commission-based advisor makes off an investor in 10 minutes. The
only way the fee-based advisor can do that is by keeping YOU
satisfied. If you aren’t then you won’t continue to use his/her
services. If commission-based brokers’ compensation was tied to
their performance most of them would go hungry!
In the next article I will share an email I received from another
advisor. You’ll be surprised at what he did to satisfy his
conscience! I’ll also provide a list of questions that you should
ask any advisor you are working with that will decrease your chances
of being an easy ‘mark’ for a financial salesperson.
Have a financial question? I’ll personally answer it. Go to
www.guardingyourwealth.com and click on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
|
