What frustrates you most about financial advisers or planners?
"What things do you feel they should have delivered on? What questions never get answered? What teachings or advice seem the most fishy to you?I know I'm asking a lot of questions, but I would like many perspectives on this. These are questions I am looking to answer on my new website"
Member answers are as follows:
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"What frustrates me most is the feeling that all they want is your money and not really to help you. They should deliver proof of the things they preach by showing the effects in their own lives. They give out all this 'great' advice, but their lives or income never show the effects of this 'great' advice." - Jennie Jones, Owner, Business Sculpting.
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"That they get paid regardless of investment results." - Jerry Edwards
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"Chris,
My main frustration with some financial planners has to do with the fact that manay of them are that in title alone. I remember several years ago as an investment broker these guys handed out business cards, had the nice suits, nice car and never too a finance course, but made money selling products and services.
I think a few gives the many a very bad name. Even though I am of the conviction that the majority are professionals, in Los Angeles, there are a lot of posers." - James Adams, MBA Candidate - International Business
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"It frustrates me that Financial Advisers and Financial Planners are paid on commission, so the conversations are generally focused on a product or products. I looked very seriously at a career as a financial adviser, but (as has already been stated), the compensation and the corporate culture are generally structured so that the incentive is to find prospects and sell as much as possible.
I think there is a definite need for financial advisers who actually look at a client's entire situation and provide full-spectrum advice, including tax planning, student loans, investment advice or management, etc. Specialized jobs exist for many of these roles (i.e. accountant, financial analyst), but it's inefficient from a corporate standpoint to find someone who can be a good generalist in all of them, and the necessary education and certifications would be cost-prohibitive.
Bottom line, the industry goes where the profit is, and there is more profit in selling financial products (insurance or investment services) on a commission basis than there is in providing good, cost-saving financial advice and compensating really qualified employees well enough to keep them on board." - Adam Endelman, Financial Analyst
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"Many folks I've met who describe themselves as planners are often focused on whatever spreadsheet they can deliver that proves you need to buy what they have a quota for. Whether a " planner" or "financial advisor" many have access to a very limited number of ideas and as a result their clients often don't get the level of advice they thought they asked for. Even though many actually mean well and believe what they are saying, there is a universe of what they don't know that they don't know, because of the business model they operate under. Therefore their clients miss opportunities to grow their wealth and/or avoid incurring unecessary taxes.
Finding an advisor with the freedom and credentials to offer competent advice that does not require or result in the sale of a product is hard to do. Ultimately most have to hit certain sales volumes either to keep their job or meet their own family obligations.
This is the primary reason why when I built my practice I chose to affiliate with a firm that would allow me to run a fee based practice accepting only a limited number of clients and not having a sales quota for anything. To be fair though it also helped that I don't have the kind of personal financial pressures others do as I already completed one successful career and this is my second.
Nevertheless, I meet hundreds of "advisors" each year at national events from all sorts of small, medium and gigantic firms. Most believe their firm has all the best answers. Kind of a silly position if you think about it. How could all the smartest people in the world end up at the same firm. But if they aren't allowed to engage the smart people from other firms to help their clients, what choice do they have but to believe their in-house folks are the best." -Russell Lowry, CFP
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"The thing that frustrates me the most about financial advisers is when they recommend a product for you without knowing anything about you. I had an Edward Jones guy try to sell me an IRA without knowing a single thing about me. Suze Orman is a perfect example of this as well.
Whether an adviser is fee or commission based doesn't matter to me. If they are commission based it is in their best interests to help me earn a return on my investment.
My current adviser took the time to talk to my wife and I about what was important to us, what are goals were now and in the future. He didn't try to sell us anything at the first appointment. He was already a friend of mine but he earned my wife's trust that day.
What I think is funny is when an adviser does a lot of work and comes up with a big binder that is your financial plan. What happens to that plan when your life changes? That plan does no good if you buy a new car or home or get a new job or lose your job, etc. My current adviser works for a company called Consolidated Planning. They have a program called the Living Balance Sheet. It is essentially the old binder plans only online and can always be updated to reflect the changes in your life." -Paul Kemer, Insurance Producer
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"I believe your question is geareed towards getting the negative side of financial advisers and planners. You will find a lot wanting in any professional who is incompetent. But, the majority are not.
I would put the responsibility of getting the best service on the client. He/she must do due diligence before hiring a person, set goals and benchmarks of achievement, and then constantly monitor performance against these goals. If there is any deviation, the client must bring it up and correct the situation. If it cannot be corrected, and the consultant is the cause, he/she must be fired." -Akhtar Khan, CEO
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"What frustrates me most of the financial planner(FP) is .....they do all other things except a good financial planning for you.
These so called FP will always creat a rosy picture ..but ..will not even mention the risk and the cost attached to it. e.g in India if you take the example of an Insurence agent, one insurance agent can only promote one brand in life insurance and another in General Insurance. De facto, this limits the scope of an insurance agent who has to work under such constraints. Customer can't expect a better advice under such a scenario...
The above illustration...is again the half truth...... such constraints does not bar them to render better advice to their clients more suited to them as per their need in future. Saving or investment are essentially made to combat the risk which may occur in future.
Really this is appalling that most of the financial planner are planning more for their own comm/return rather that the benefits or returns of their clients. This is an ethical issue which must be addressed by the FP." -Gyanendra Niraj, Manager
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"Chris - As a former planner myself (I'm still appointed as an IAR), I have also had many of the same frustrations that you point out in your question. The lack of ethics and morals that other planner, advisers, etc..etc..took place in, the harder my job was to accomplish. I have made it a point in my career as a planner to actually differentiate myself from the others and their greed filled objectives.
From an "inside" view, I see the entire Financial Industry as the culprit. We can blame the players within the game, but the rules are unwritten and the object is to just "bring in the money".
At the company that I am appointed with (..I still manage my clients money but I don't actively seek out new clients...) I see the culture where the rules are placed down, but if you are a larger producer, well then the rules are optional and the personnel with a 24 behind their name, look the other way. These larger producers are put in the spot light and shown to the newer brokers, advisers as the example to follow.
How self defeating is that?? This is the prime example of "penny wise and dollar foolish."
As you well know, there is no "cookie-cutter" solution for every client. The ethical adviser must be able to take the goals of the client, the taxation, estate, protection aspect, wealth accumulation strategy, withdrawal strategy and see the larger picture. This is rarely done and most advisers will put them into what ever is the larger commission paying product because that is what's taught to them and they know not what they do in the long run. I could go on for hours and pages about this. This is my hot button.
After reading additional answers after I posted, I must say that I disagree. There is a possibility for flat fee advisers or planners to do better work. But there is also a distinct chance of them adopting a "not caring" attitude as they have already been paid. Whether it's paid in commission, fee-based or a combination of both, look at the individual and the course of action that they are recommending, not the fee structure. If it doesn't make sense, ask them to clarify. Don't be afraid to ask questions that you may seem to feel are less than intelligent. Few people who do not work in the industry know the terminology or the impact of the action being taken.
Finally, just on a personal note; this is why I struggle with my peers who are still active planners. Everyone thinks that we are out to take the client for a "ride". Not all of us. I'd rather put the interest of the client first instead of my wallet. I'd rather do the quality work and then be referred to others. The minute you do work that is reflecting what is in your (IAR's), then you might as well hang it up. You'll be short lived and soon, someone will be writing a blog about you and your name will spread like wild fire. Just the opinion of one IAR." -Anthony Preman, Numerologist
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"Chris, I have to agree with most of the other answers. It's a natural phenomenon in any large industry. Most advisers are good people who try their best, but fall short. They may earn a good living and help a few people.
But the lion's share of business goes to those few individuals who really listen, match the solutions to the needs, and lead people towards their own goals. It's a long, tough, and emotional journey. It requires special individuals to deliver over the long haul.
I know it's frustrating to sift through many people to find "the one" for you. But when you find the right fit, it's worth it." -Brian Beasley, CPWA
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"Most of the issues mentioned thus far could potentially be solved if people sought out the proper type of financial advisor. The issue, from my perspective (as a comprehensive financial planner), is that the term "financial planner" and "financial advisor" is used indiscriminately by a number of different types of people. You have commission based stock brokers calling themselves financial advisors, you have insurance salesmen calling themselves financial advisors and financial planners. Heck, I even know mortgage brokers that call themselves financial advisors.
So I cannot blame anyone for becoming confused and suffering at the hands of some of these people. Most commission based salespeople do not have a fiduciary duty to the client to act in their best interest. They are bound by a something called a "suitability" standard which says they must make an attempt to sell you something suitable to your situation but that is not the same as having a fiduciary "duty".
There are all types of compensation arrangements for true comprehensive financial planners. Some do indeed work by selling commission based products (up to the client to know this). Some work by charging a percentage of investment assets under management and this fee includes comprehensive planning. Still others offer their services on a retainer basis or on an hourly basis. There are ethical and unethical people in each and every segment thus far mentioned in my response, however, there seems to be more "pressure" on commission based salespeople.
Comprehensive financial planners who manage people's investments, provide them with a life plan, and help them change that plan throughout the transitions of their lives have very loyal clients who are great sources of referrals. They need not be pressured into selling anything because the relationship is such that it provides returns far into the future.
It seems that the primary concern in most of your responses is the lack of concern for you as a person by an advisor who has something to sell. My advice to those of you with that problem is to find a "fee-only" financial planner, or someone who charges hourly for planning, or someone you can hire on a retainer basis. You can find advisors like this by going to napfa.org (a group of financial planners who have agreed to only charge fees and not commissions), or by simply typing "fee-only financial planner" in your area into Google. Be sure and ask potential advisors how they are compensated if the commission thing is something that irks you.
I, for one, have several different types of arrangements with my clients. Some of them have uncomplicated financial lives and simply need someone intelligent to manage their investments. For those people I charge a very low percentage of assets under management for investment management and then any additional planning is done on an as needed hourly basis. For clients with more complicated financial situations who need ongoing planning in addition to investment management I charge them a percentage of assets under management which is a bit higher than the first situation above but the planning is covered with this fee and there are no additional hourly charges. I find that this situation works well for most clients and choosing a compensation package allows them to get the most for their money.
One final response to Jerry about getting paid regardless of investment results. That is an understandable complaint but one which might be a bit off target. Investment managers who charge a percentage of assets under management have every incentive to manage your money as best they can. Otherwise, if the markets drop their compensation likewise drops. Yes, they still get paid if the portfolio decreases in value but they get paid less. You also have to factor in the value of their service in this regard.
Study after study has shown that individual investors often sell out at low points and buy in at high points. "If" (and I realize this is a big if) your advisor manages your portfolio in a manner that saves you from some of these behavioral biases then should he not be compensated for that? Also, remember his compensation includes financial planning in many instances so this must be factored in as well." -Jeff Howard, CFP
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"They're too often looking at enriching themselves first by pedelling "products." I studied business finance, and worked in the field, in college through my senior year, so I know something about it. Show me a Financial Planner who truly places his client's interests first by providing sound guidance, counceling and - yes - instruction, and I'll show you an FP well on his way to fame and fortune!" -John Mackin, Marketing
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"Lack of knowledge about the actual investments they are recommending (portfolio manager philosophy, statistics of the fund, cash flows of the firms in the fund, etc). I also don't like feeling like they have any sort of conflict of interest. In other words, I want them to be working hard for my best interests, not their own. That may mean sending me to someone else who can help me better, but if they do so, I will know I can trust them to come back to them for whatever product or service I need that they offer." -Mike Berry, Owner Real Estate Services
