Things Your Financial Advisor Does Not Want You to Know

Investments and handling finances are things that cannot be easily learned over a couple of days. They require complex decisions and can be overwhelming. Especially for first-time investors. As a result, most investors ask help from professionals, specifically financial advisors, when it comes to financial decisions. After all, all we want is financial freedom. But at some point, you need to stop and assess the situation carefully. Is your financial advisor trustworthy? Are you confident that he/she helps you achieve your financial goals? Do you feel like there are things your financial advisor does not want you to know?

Let us face the reality. Not all financial advisors are after the consumer/investor’s good. There will always be good and bad ones. Just like in any other service. During these unprecedented times, where the economy is unstable due to the pandemic, finding a trustworthy financial advisor is important. In the past, it is quite hard to find a financial advisor that you can trust. Most people only rely on friends or family’s recommendations. But with the advanced technology and social media, communicating and investigating financial advisors now has been easier.

Who are financial advisors?

As defined by Investopedia, financial advisors are professionals that help consumers or investors make financial decisions. It may include investment decisions or other actions. In addition, they educate consumers about financial topics. Here are the other things your financial advisors can assist you with:

• Aid clients in developing financial plans, strategies, and retirement plans
• Advise financial strategies and investment plans to clients
• Analyze consumer’s financial data
• Help client determine financial goals

Do you need a financial advisor?

If you are thinking of working on anything mentioned above, you need a financial advisor. Though some financial decisions can be self-managed, it pays to have an expert by your side to guide you throughout the process. Financial advisors are a big help when you are confused about how to start an investment or overwhelmed by information.

If you decide to hire a financial advisor, keep your eyes and ears open all the time. Look out for the red flags. As much as possible, interview at least two or three financial advisors and perform a background check. Doing this can minimize the chance of hiring a bad financial advisor. Work with someone who puts your interests first over his/her.

To help you keep away hiring bad advisors, we will discuss the things your financial advisor does not want you to know

Things Your Financial Advisor Does Not Want You to Know

Here are the top 5 things your financial advisor does not want you to know. Be wary and watch out for any red flags.

There is a wide variety of investment type to invest in

A financial advisor’s main responsibility is to provide extensive financial knowledge and guidance to his/her client. It also includes financial investments that a client can invest in depending on his financial goal. The information relayed by the financial advisor is what the client depends on. What most consumers do not know is some of these “advisors” work for big brokerage firms and insurance companies. Chances are that their priority is to promote their product. Thus, a conflict of interest can exist as their only goal is to sell their product to you. They might only offer a limited choice of investment strategies in line with their company products like stocks, bonds, or mutual funds. Who knows if real estate might be the perfect choice for you? As a result, you may miss out on some opportunities since it was not discussed with you in the first place.

How financial advisors get paid

Most financial advisors earn money by commissions. Meaning, if they present a product to you and you buy it, they make money from it. This is one of the main reasons why financial advisors tend to be biased. A bad financial advisor will recommend a product to you not because you need it, but because they will get paid from it. The more products or packages you buy from him/her, the more money he/she makes. Unless your advisor is fee-based, you can completely trust his/her recommendation. Fee-based advisors charge a pre-stated fee for their services. It can be a flat rate or an hourly rate. Besides, fee-based financial advisors have a fiduciary duty to their clients. Fiduciary duty means they swore upon legal liability to always put their client’s best interest first.

Not all financial advisors invest in any investment type

Let us be real. Not all financial advisors actually invest in any product they might be offering to you. Yes, they are educated about these products, but they focus more on earning commissions from selling these products. Your financial advisor might be discussing a lot about stocks, bonds, or real estate. But does he/she invest in it? If this is the case, do you still think you should follow his advice? If you want to achieve your financial goals, hire someone who has personal experience and knowledge on the investment that he/she can share with you. The knowledge that the advisor acquired from personal experience is valuable than the information he/she only got from their discussion.

How they come up with recommendations

Most consumers think that the recommendations provided by the financial advisor are based on their collected financial data. While this may be true, some advisors do not perform an evaluation. Oftentimes, the recommendations they make are the products they needed to sell. Furthermore, the information they are sharing with you came from someone from their organization. They are only pushing a certain product because they will greatly benefit from it but not the consumer.

Hidden fees and costs

One of the important things your financial advisor does not want you to know is the hidden costs behind their recommendations. Most advisors will make clients believe they have purchased the product at the best price and terms. Without knowing that the first year the clients are paying for the products are the advisor’s commission and other expenses.

Summary

There you have the top 5 things your financial advisor does not want you to know. Always keep in mind that even though bad financial advisors exist, you can refrain yourself from working with them by performing due diligence. In any field and investment type, it is important to do your research. Educating yourself before taking an action is the key to any of your financial goals.