Bryan Binkholder Discusses Wealth Managers: It’s Not Personal, It’s Business
When I got my first real glimpse of the misdeeds and selfish schemes of the financial services industry decades ago, I made the decision to take a solid stand against it. At the time it was almost inconceivable to me that firms and dealers could be so openly corrupt. Sure, you could think to yourself, business is business and at the end of the day everyone wants to make a sale. This is true to a degree. From the car salesman to the restaurant owner, everyone does want to turn a profit, but when it is clearly and HEAVILY at the expense of the client, then what?
There is free enterprise and then there is corruption and highly questionable practices, –many which should be illegal. Let’s look at a hypothetical situation, and you tell me what you think:
What if Other Professions Operated Like the Financial Services Industry?
Let me ask you a question. Let’s say you needed to make an appointment with a medical specialist for your son or daughter. When you think about your child being placed in someone’s care, there’s no doubt that you envision an ethical, knowledgeable professional who is passionate about what they do. But what if that wasn’t the case at all? What if this physician had minimal training and the majority of the seminars and classes he attended were not geared toward learning more in his or her chosen field. Instead, it was discovered that this doctor spent much of his time learning how to charge more for his services, which treatments were the most lucrative, and how to bill so that he could enjoy the highest profit margin.
What if it went even deeper? What if he had partnerships with other doctors who paid to be on his list of recommendations. If a patient came to see one doctor, they were automatically referred to the next on the list, whether they really needed the additional services or not. Oh and let’s say that the second doctor wrapped some extra fees in his bill to you, such as the commission he had to pay to the original specialist, — you know, to be on the referral list.
If you’re not only finding it hard to keep up with the above scenario, but finding it completely ridiculous as well, I’ve got news for you. Take that exact scenario and move it over to financial advisors, wealth managers, and mutual fund managers, and it’s business as usual.
Two Very Different Views
How You View Financial Advisors:
If you are looking to (or already are) investing for your retirement or financial future, it’s no small deal to you. This is your future and often, it’s a big chunk of your life savings. You’re counting on these finances to take care of you when you’re older and hopefully to provide a nice inheritance to your children, and your grandchildren. Just as you trust your family doctor and the specialists he or she refers you to, –you also trust your financial advisor.
That’s all very nice, but unless you are dealing with a Registered Investment Advisory Firm that works on a fee only basis, you’re seeing your advisor through rose colored glasses.
How Financial Advisors View You:
Registered Investment Advisors (RIAs) are held to a fiduciary standard (so are physicians). They take an oath and are bound by law to operate according to your best interests.
On the other hand, wealth managers, financial advisors, mutual fund managers and brokers are not fiduciaries. They are not bound by law to work on your behalf. In fact, their allegiance is to the mutual fund company or broker/dealer they are selling financial products for. They are there to make money and you are their source of money.
But Beware of RIA’s Wearing 2 Hats (Called Dual Registration)
In yet the newest form of marketing deception, financial salespeople have found people are waking up to the idea of having somebody working for them instead of against them. So what do you do if you are dependent on commissions and selling stuff? Ah Ha! Let’s set up an RIA and market ourselves as Fiduciaries but then we can “Take That Hat Off” and sell commission based products like mutual funds, annuities, bonds, and etc. Talk about tricky……That’s why you should refuse to subject your wealth to these conflicts and utilize FEE ONLY advisors.
Regardless, commission based financial advisors are not your friend. They are not giving you a call to come meet with them because they are concerned about your family. When they call to make an appointment, there is a reason and it looks like one of these:
Reasons Financial Advisors Call You For a Meeting
- To see if you have recently come into any money, property or inheritance.
- To find out who you will be transferring your wealth to so they know which family member to target and which not to waste their time with.
- To sell you more financial products.
Those are the reasons. Don’t believe me? Still think you are different and special? Here’s part of an article entitled Wealth Managers Vying for Trillions From Intergenerational Wealth Transfer from WealthManagement.com. The article is written for financial advisors and wealth managers. It talks about the large transfer of wealth that’s taking place as baby boomers age, and how to handle that transition while still retaining the transferee as a client:
Talking to older clients:
“Financial advisors need to be extremely diplomatic when approaching the older generation, especially if their net worth is under $20 million.
In an era of low interest rates, even couples or a surviving spouse with millions of dollars may feel they are “income poor,” and, after setting money aside for grandchildren and charity, may be reluctant to discuss transferring their wealth to the next generation, said attorney Arthur Field, who runs an eponymous consulting firm for wealthy families in New York. What’s more, he added, people are living longer and wealthy families remain spooked by the money they lost in the financial crisis, despite the market’s recovery.
“You have to size up the senior generation,” Field said. “If they are sophisticated and accept the fact they are not going to be around forever and are open to sitting down with the second generation—terrific. But if you press them too hard and they are not ready for this type of discussion you can alienate them—and they are your meat and potatoes.”
So, they’re discussing how to “size up” their clients, who, by the way, are referred to as their “meat and potatoes”. Still getting that warm, fuzzy feeling about your financial advisor? I didn’t think so. But wait, there’s more.
Here’s an idea of the training seminars your financial advisor may be involved in. All you have to do is Google, “Increase your financial product sales” and you’ll see plenty of helpful classes like this one offered by At One Go Financial’s website.
Proven Steps to increase financial product sales, customer retention and referral business by more than 50% Workshop!
I especially liked the details that I boxed in red. “Why your client will want to disclose all their finances to you willingly? How you can increase your financial product sales and services by at least 50% and create a new revenue stream!
Funny, it sounds more like the client is nothing more than a container with money in it, and the financial advisor is trying to find out how much and how quickly he can siphon it out. Is this the type of individual you want handling your family’s future? It sounds more like a wolf in sheep’s clothing than it does a caring, knowledgeable professional.
If you are currently relying on a financial advisor or wealth manager, I strongly suggest you take another look at your future today, before it’s too late. You need someone in your corner with your best interests at heart and the only way to achieve this is by using a Registered Investment Advisory Firm, such as Blue Ocean Portfolios. They provide full fee disclosures and work on a fee only basis. No kickbacks, no attending seminars to try to learn how to squeeze more money out of clients. Blue Ocean Portfolios believes in the tried and true method of actually helping their clients to succeed. They believe by adding value to the lives of others, they will prosper.
Give them a call to discuss your financial future. If you’re looking for more information on the traps and pitfalls of dealing with financial salespeople, I suggest you visit The Financial Coach Show website and take advantage of my free products. The 7 Deadly Traps of Investing is a great place to begin.