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February 02, 2006


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There are common phrases to describe this phenomenon:
"Doctor, heal thyself"
"The cobbler's children have no shoes"

While I'd be more comfortable with someone who followed his own advice, I know excellent doctors who smoke or are overweight; I know capable lawyers who don't have a will or estate plan; I know intelligent MBAs who are overwhelmed by their own taxes; my contractor's house has a leaky roof.

Ultimately I don't think that whether or not a professional follows his own advice is a good indication of the quality of that advice. For many people dispensing advice or assistance is their day job, and no matter how good they are at it, after doing it for 60 hours per week it's easy to neglect their own situation.

how true.
the guys at national investment brokerages are no better either!

One of my friends is a CFP. he started out as an engineer and made and lost a million dollars (with a little help from Merill Lynch, but mainly his own fault). He later rebuilt it back but he says that sort of experience is priceless. Most FPs learn at your expense!

I had read this somewhere (not sure if on FMF)...
A guys is asked by a banker/advisor/planner if he would allow them to manage his money. The guys asked them to send him their tax return & net worth statements for the last 3 years. If they had done better than him, he would consider hiring them. As expected, no one wanted to take that challenge!

Param - I believe that is from "The Millionaire Next Door"

As an undergrad, a broker asked me to research mutual funds and give him a list of my recommendations...he then sold them to his clients!

Even with the best research all a broker can do is provide you with an educated guess.

In any profession there are good & bad examples.

Think about your own profession...some horror stories come to mind.

I think the biggest problem is that individuals randomly contact a financial advisor (or get a referral to someone who isn't the right match for them) and investment advisors are marketing to the mass public, not just their target clients.

The key is to find the right match for your financial goals. Most people don't realize that there are financial advisors who specialize in industries (teachers, pilots, lawyers, etc.), in ethnicities (Hispanic, African-American, Jewish, etc.) and in needs (socially responsible investing, disabled children, divorced women, etc.)

Connecting to the right financial advisor for your specific needs is one of the best ways to avoid the loser. Advisors that have been in business long enough to develop expertise in a certain area are usually the cream of the crop.

Smith Barney
Before You Ask Smith Barney to Manage Your Assets, Listen to These Sexual Harassment and Sex Discrimination Allegations

• 26 women have filed a class action suit in federal court claiming sexual harassment and sex discrimination at Smith Barney.
• No more than 13% of the company's 11,000 brokers are women.* Attorneys for the women plaintiffs allege only 5% of the firm's brokers are women.
• Only 8 of 390 Smith Barney branch managers are women.*
• Attorneys for the women say they have received complaints about Smith Barney from as many as 100 women.
Branch Office Complaints from Coast to Coast:
• Garden City, N.Y. — A former branch manager allegedly brandished a gun and used vulgar sexist slurs. The same manager has been accused of furnishing a "Boom Boom Room" where he served male brokers bloody marys and they joked about sexual harassment complaints.
• Richmond, Va. — Women workers charge that a branch manager told women workers at a Christmas party he would pay them $100 if they took off their shirts.
• Knoxville, Tenn. — Allegedly, a branch manager would say of women in the office that "she needs a good (expletive) and I can give it to her."
• Kansas City, Mo. — A woman claims that her branch manager failed to direct accounts from departing brokers to her, while routinely giving such accounts to younger, less experienced male brokers.
• Seattle, Wash. — A woman states that she found her job was cut when she returned from maternity leave.
You Can Help!
Tell Smith Barney that sexual harassment and sex discrimination are bad for business!
Jamie Dimon, CEO Smith Barney
388 Greenwich Street
New York, NY 10013

* According to a Smith Barney spokesperson as reported in the Washington Post.

In his defence, Financial Adviser can be a braod term used by the banks for their staff. It could be that he just sells protection insurance all day long and doesn't do an 'financial advice' as such. I used to work for a bank and they called us financial advisers but we were hardly that. We were only allowed to sell a handful of products and couldn't comment on any other lender's products...hardly a financial adviser

By the term financial advisor, a lot of things come to our minds. Generally, we take help of financial advisors and hugely depend upon them during some investment related matters.
But after going through your article, I would certainly do a lot of home work, rather than just rely on my advisor. Also adding to your point, we should always try to choose some experienced financial advisor.

My husband and I have retired in the last year. We have built a new house and have a large mortgage. Needless to say, our old financial advisor did not advise about saving for the house and we started building when the "recession" hit. We lost $60,000 in our investments and we had planned to put $100,000 down and do most of the work ourselves. We did a lot of the work ourselves, but we had to hire a contractor or we couldn't get a loan to finish the house.

Our current financial advisor has most of our money tied up in annuities.

How can we get our house paid off early? We have a 30 year mortgage. And are annuities the right place for our money?

Nancy --

I'll post your question in a week or so. Stay tuned.

Interesting, but something I saw here and there in my days as a financial planner. Have you ever heard about plumbers that have leaky pipes? Contractors that have unfinished houses? Financial advisors that don't take their own advice? Unfortunate, but this does happen in any profession...the financial industry included. A great financial advisor will help educate you - and that's something you really have to do for yourself - in the end, you need to make the decisions! Thanks for the post!

Interesting, but something I saw here and there in my days as a financial planner. Have you ever heard about plumbers that have leaky pipes? Contractors that have unfinished houses? Financial advisors that don't take their own advice? Unfortunate, but this does happen in any profession...the financial industry included. A great financial advisor will help educate you - and that's something you really have to do for yourself - in the end, you need to make the decisions! Thanks for the post!

I need to know if there is a way to report a Financial Advisor who has flat
out lied about what hes investing my money in????

I can tell you the truth that most financial "experts" or advisers are really nothing more than good salespeople! I was in the investment business for many years and the top brokers were really good at one thing. Closing the deal!

Do you remember that old joke about the investor walking down the pier and gazing at all the beautiful yachts? He remarks to his companion, those boats must belong to all of the successful investors. No, his companion replies, those beautiful yachts belong to the stockbrokers who sold the investments!

You have to have good sales skills to be a a successful financial advisor because whilst their services are very important and even crucial to most people, the products and solutions do not sell themselves. Many people including most bankers do not actually understand the world of finance and whats available and even right for them. A good advisor can do this for them. It is interesting but often people will fail to address their finances until it's already too late. This is why advisors proactively target clients because very few people will pick up the phone and say "hi I need help planning for my retirement" or "my finances are in a mess and I need help restructuring them" yes I know some of us do do that but most will not and that is why you have to be good at sales to be a strong advisor. A good advisor may earn a fee or a commission from a client that in itself is worth next to nothing when com oared to the benefit he/she has had on the client. They can have a dramatic impact on the client finances and hugely improve there life. Conversely if you do get a bad advisor then the opposite could be true. It's a tough and thankless job since people see them as a cost as opposed to someone who will help them save tens or even hundreds of thousands! Often a good advisor could make the difference from having the option to retire at say 50 instead of 65. They are only thanked by the client many years down the line.

Wow! A whole article ... with nothing in it. Your headline warns you not to pick a loser for a FA. Yet, you offer no help whatsoever on how to do this.

Worthless waste of my time. Bye-bye. I won't be back.


Big Dave --

I'm guessing you're a financial advisor...

And as for not giving help on how to pick one, did you see the link at the end of the post titled "How to Choose a Financial Advisor"?

Maybe I should write a post titled "Make Sure Your Advisor Can Read Before You Hire Him."

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