Make Sure Your Financial Advisor is Not a Loser

I am usually at work fairly early every day (by 7 am) and as such I usually leave around 5 pm. A few nights each week I get home at 5:20 pm or so and go to the basement to exercise before dinner. When I do this, I often turn on the TV for something to watch while I sweat off 1,000 calories or so.

In case you don't know it, there's not much on at 5:20 pm (I don't have cable). However, I have found one saving grace during this timeframe...Judge Judy.

Ok, now that you've stopped laughing, let me say that Judge Judy is quite entertaining. I especially like how she blasts people who are clearly in the wrong, trying to lie about a situation, or just plain shady. She dishes it out and doesn't take it from anyone!!!!

So I was watching it the other day when Judge Judy was all over this guy who was clearly a "loser". He was in debt, made all sorts of bad financial decisions, and had had his car repossessed. He was being sued for $4,000 he owed on another car. Needless to say, he lost the case. He took a lot of heat from Judge Judy, but he handled himself so poorly that he basically asked her to yell at him. Overall, he came off as someone who had no control over his personal or financial life.

Just before she rendered judgment, Judge Judy, as she often does, asked if the guy worked for a living. He said he did. She asked what he did. He said he was a FINANCIAL ADVISOR. Imagine Judge Judy nearly falling off the bench at this point. I can't remember what she said exactly, but it was something to the effect of, "You've got to be kidding me!" She then asked where he worked. He said "at a bank." She asked if it was a national bank, and he said it was.

All of this to say that you should never, ever, ever trust your money and financial decisions to any sort of "financial advisor" that you haven't checked out, called his/her references (preferably from people you know), and interviewed as if your life depended on making the right choice. And just because you may trust a well-respected bank, broker, or other financial institution doesn't mean you should trust their "financial advisors". In many cases, these people are simply glorified salespeople who probably know less about managing money than you do.

To read more of my posts on this topic, see these links:

• Hiring the Wrong Financial Advisor is Bad for Your Net Worth
• Operate Your Household Like a Business when Hiring a Financial Advisor
• How to Choose a Financial Advisor

Comments

[samerwriter]

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.

[Wealth Building Lessons]

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!

[Param]

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!

[CPA1298]

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

[Prof. Silver]

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.

[Sean Wilson]

In any profession there are good & bad examples.

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

[mel marten]

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.

[Bill Jeter]

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
212-816-8800

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

[Life Critical Illness]

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

[Julie]

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.

[Nancy Rees]

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?

[FMF]

Nancy --

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