Can You Trust Your Financial Advisor? Or Anyone?
The truth is people are selfish. A person makes decisions on what actions to take based on what they believe will benefit him or her. Is there such a thing as true selflessness? Even when someone helps another individual “out of the kindness of his heart,” isn’t she really acting in order to get that pleasing feeling of having done something “for” someone else?
Liz Pulliam Weston is asking whether you can trust your financial advisor or whether he is looking out for his own well being instead of yours, his customer.
She suggests looking at the advisor’s professional title. According to her chart, an attorney is looking out for your best interest, as is a certified public accountant. A financial planner, even a CFP, may be looking out for your best interest. Registered representatives and stock brokers are looking out for their own best interest.
The author provides three questions to ask your advisor to determine if your advisor is really on your side:
* Are you legally obligated to act in my best interests at all times? If so, are you willing to put that in writing?
* Will you disclose all potential conflicts of interest?
* In what ways are you compensated?
Perhaps I’m cynical or overly philosophical, but sometimes I feel there is only one motivator in anyone’s decision making process: What will be more beneficial for me? That may be selling products with high commissions for the short term monetary gain. That may be building trust through an advisor relationship in order to assure repeat and consistent business. That may be building a trustworthy reputation also to ensure future business.
Do people become because they want to help people? Or do they because they want to feel good about their ability to help people?