[mike_bayer]

Great article - if I don't say so myself.


http://network.nationalpost.com/np/.../11/can-you-trust-your-financial-advisor.aspx

And a few more points from Larry Swedroe.

http://moneywatch.bnet.com/investing/blog/wise-investing/?tag=content;col2

FWIW-my view on how to find an advisor you can trust

Surveys show that along with the financial expertise of the advisor, investors look for someone they can trust. Trust, however, is an intangible quality; it cannot be quantified in the same way one can look at a baseball player’s batting average. Therefore, my recommendation is that when interviewing a potential financial advisor you require them to make the following eleven commitments to you. Doing so will give you the greatest chance of avoiding conflicts of interest and the greatest chance of achieving your financial goals.

1.Our guiding principle is that our advice will always be to do what is in your best interest.

2.We provide you with a fiduciary standard of care— the highest legal duty that one party can have to another.

3.We are a fee-only advisor—avoiding the conflicts that commissioned-based compensation can create.

4.We fully disclose potential conflicts.

5.Our advice is based on the latest academic research, not on our opinions.

6.We are client centric—we don’t sell any products, only advice.

7.We provide a high level of personal attention—each client is assigned a team of professionals with which they will develop strong personal relationships.

8.We invest our personal assets, including our profit-sharing plan, based on the same set of investment principles, and in the same or comparable securities, that we recommend to our clients.

9.We will develop an investment plan that is integrated into estate, tax, and risk management (insurance) plans. The overall plan will be tailored to your unique situation.

10.Our advice is always goal-oriented—evaluating each decision not in isolation, but in terms of its impact on the likelihood of success of the overall plan.

11.Our comprehensive wealth management services are provided by individuals that have the CFA, CFP, PFS, or other comparable designations.

 

[Jon Chevreau]

And today's entry features a white hat, instead of a black one: also posted in the Mutual Fund Discussion. But I see some heated comments on the earlier "black hat" entry.

Is it fair to use black and white hats as descriptors of advisors? Or, as I suggest below, should someone advocating a blend of active and passive management therefore don a "grey" hat?

http://network.nationalpost.com/np/blogs/wealthyboomer/default.aspx

 

[Squash500]

IMHO financial advisors aren't even necessary. For the last few years all I have been doing is buying ETFS in a discount brokerage account. By doing this I don't pay any advisory fees whatsoever!

IMHO no financial advisors can be trusted whatsoever. There's too much conflict of interest out there. Financial advisors are just salespeople. Nothing more or nothing less.

 

[frdsmth9]

I think there are two main problems here. One is that ‘financial advisors’ who sell their own company’s products are completely untrustworthy. I would only ever get help from a flat-fee advisor.

But the bigger problem, and I realize this sounds harsh, is that people are simply ignorant about finances and investing. Someone who would haggle for hours over a five dollar shirt in Mexico doesn’t have the basic knowledge to understand transactions in the thousands of dollars. I find this appalling.

 

[Squash500]

I think there are two main problems here. One is that ‘financial advisors’ who sell their own company’s products are completely untrustworthy. I would only ever get help from a flat-fee advisor.

But the bigger problem, and I realize this sounds harsh, is that people are simply ignorant about finances and investing. Someone who would haggle for hours over a five dollar shirt in Mexico doesn’t have the basic knowledge to understand transactions in the thousands of dollars. I find this appalling.

I agree with you. I personally understand how financial advisors get paid. Due to the fact that I understand the financial advisors grid system etc I managed to get kicked out of a lot of financial advisors offices in my life.

Therefore IMHO you can't win either way. If you don't understand the whole financial business then you lose out by paying higher fees then you really should.

If you do understand how advisors get paid then you get treated harshly by financial advisors because you are on to their games.

IMHO the only solution is to be a DIY investor!

 

[OntFA]

IMHO financial advisors aren't even necessary. For the last few years all I have been doing is buying ETFS in a discount brokerage account. By doing this I don't pay any advisory fees whatsoever!

IMHO no financial advisors can be trusted whatsoever. There's too much conflict of interest out there. Financial advisors are just salespeople. Nothing more or nothing less.

squash, what you say is amazing and either indicates that you like to make sensational statements or simply extrapolate your own experiences to an entire group of people. Are all financial advisors untrustworthy? Are all lawyers ambulance chasers? Are all doctors lazy pill pushers? I could continue with racial generalizations and the extrapolation would be equally unfounded.

I think there are two main problems here. One is that ‘financial advisors’ who sell their own company’s products are completely untrustworthy. I would only ever get help from a flat-fee advisor.

Hmmm, technically, you could say that all financial professionals that are paid by asset based fees have a big conflict. After all, they stand to make a bundle more dough by keeping more money invested in their securities instead of in a rental property, a private venture, or paying down even pretty cheap debt.

But the bigger problem, and I realize this sounds harsh, is that people are simply ignorant about finances and investing. Someone who would haggle for hours over a five dollar shirt in Mexico doesn’t have the basic knowledge to understand transactions in the thousands of dollars. I find this appalling.

I think this is not far from the truth. Most people know a little but not enough to make sound investment decisions and successfully manage their investments after the initial investment is made. This contradicts squash implying that most people are not armed with enough knowledge and the right personality to successfully invest. And I think this is painting a fair picture of the average Canadian with regards to investment decisions.

 

[Squash500]

squash, what you say is amazing and either indicates that you like to make sensational statements or simply extrapolate your own experiences to an entire group of people. Are all financial advisors untrustworthy? Are all lawyers ambulance chasers? Are all doctors lazy pill pushers? I could continue with racial generalizations and the extrapolation would be equally unfounded.

I realize that they're some good financial advisors out there. However for the most part IMHO most FA's don't add enough value to clients portfolios to justify there high fees.

IMHO you can't compare Doctors and Lawyers with financial advisors. FA's have very little fiduciary duty to their clients compared with docs and lawyers.

After reading books by such authors as John Lawrence Reynolds and John De Goey I find it very difficult to respect and trust most FA's. Just my opinion!