You Can’t Trust Them

Here’s a slap for the money business – well, about 75% of the money business.

The sad truth about the financial advisor business is that only 25% of the advisors out there can be considered investment experts. The other 75% are salesmen – by all measures, very good salesmen.

The industry doesn’t make it easy to know who are the experts and who are the salespeople.

Let’s face it: When you give your money to someone to invest, you are literally turning your future and your retirement over to them. So you’d better know how to identify the expert.

But most turn the selection process into a personality contest: He’s a great guy or a great golf partner, he’s a cousin, or my friend uses him. (And they pay dearly for it.)

In the 28 years I have been working in the money business, I have seen some real disasters that were the result of slick salespeople, usually friends or acquaintances who wanted to be thought of as friends and had only one focus: their payout.

That’s why I was stunned when President Trump blocked the rule that would require the fiduciary rule to be applied to all retirement accounts. It is the one thing I think he is completely wrong about.

The fiduciary rule states that an advisor must act in the best interest of their clients. The clients’ interests must come before the advisor’s in all decisions, and the most important decisions are those that concern how much the advisor is paid for what they recommend.

If you want to be sure your interests are at the head of the line, make sure your advisor adheres to the fiduciary rule. Fiduciaries are required to put your interests first, and they are held to the highest standard in the business.

As far as I can tell, the only way to be certain your advisor is a fiduciary is to ask. If they aren’t, get ready for the rug dance of the century when they try to sidestep the question.

I wrote a piece recently about a friend who was being socked $50,000 per year in management and mutual funds fees by a so-called friend who handled his money. When he asked about the amount because it seemed over the top, my friend said his advisor was loaded for bear with explanations galore.

Of course, he wasn’t a fiduciary.

There is no reason anyone should deal with an advisor who does not adhere to the fiduciary rule. The costs are about the same, and you can’t do any better. This is one of the few safety valves in the system, and you have to use it.

This really is you against the money business, and if you don’t stand up for yourself, you shouldn’t expect anyone else to do it for you.

Make the call.

Good investing,

Steve