Money Magazine is sharing an interesting piece of advice in their September issue. This comes from “The Mole,” the magazine’s “underciver financial planner.” If your financial advisor or broker tells you there are no fees for a particular investment or no risk for some product, ask to confirm in in writing.
Even though my clients relied on these promises [of no fees and no risks from other advisors] when they chose investments, they had nothing in writing to prove it. In fact, within minutes of making those misleading statements, the adviser probably had the client sign a multi-page disclosure document that contained language (buried deep inside) directly contradicting the oral promise. Advisers know no one is actually going to read all the disclosures before signing.
Here’s an easy solution. When your adviser makes an extreme-sounding claim, send him a nice, friendly e-mail articulating your understanding of what he said.
Ask him to confirm it in writing. If the statement is accurate, he should have no problem. If he backpedals, dismisses your request by saying “That’s in the disclosure document” or just calls you up to repeat his oral promise, get very suspicious. If he won’t write, something’s not right.
The Mole’s reports take a look at what happens behind the scenes in the world of financial planning. The more someone has knowledge of what goes on on the “inside” will be in a better position to make good decisions. This piece from The Mole is advise is quite clever; theoretically, an advisor knows better than to formally document a lie and will avoid that at all costs.
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Great call – getting it in writing means at least some degree of protection. Fee options for planners range far & wide e.g. fee-only per product sold or an annual fee based on your assets or wrap fees where management fees + annual percentages + fee-based amounts are rolled into one charge … or hourly charges or annual retainers. So when an adviser says they won’t charge, confirming it in writing is a sharp move, since the fee discussion may not be as face-value or overt as one would hope. I think I’ll videoblog on this further! Thx for these posts.