Financial advisors have to control or influence the investment of your assets to make money. And, the unfortunate truth is, very few advisors can afford to tell you the truth when they sell financial advice, services, and products. Their alternative is various sales tactics that hide their shortcomings and convince you to buy what they are selling.

I am going to describe the five most frequently used sales tactics that advisors use to gain control of your assets. You can avoid these tactics if you know they exist.

#1 Personality

Wall Street figured out a long time ago that money was a very emotional topic for most people. It was even a leading cause of divorce. Wall Street figured out an easy way to tap into all of that emotion. Hire advisors with pleasant personalities and teach them to tell you what you want to hear.

The strategy worked for one fundamental reason. You tend to trust people you like. It you like your advisor you do not question his advice. It works because most people have trouble believing their nice friendly advisor will take advantage of them to make more money.

#2 Transparency

This is a big word in the financial services industry. Transparency is the amount of information an advisor volunteers in a documented format. Why documented? When your financial security is at stake, you should trust what you see and not what you hear. Verbal information is too easy to manipulate and deny later.

The opposite of transparency is withheld information. Nothing is volunteered. You have to ask the right questions and know good answers from bad ones. Withholding information works because very few investors ask the right questions when they select financial advisors.

Top quality advisors practice transparency because they have nothing to hide. Low quality advisors withhold information because they have a lot to hide

#3 Misrepresentation

Advisors have to convince you they are financial experts so you will buy what they are selling. Low quality advisors have a major problem because they have to compete with high quality advisors who are real financial experts.

These advisors misrepresent their credentials so they look like experts. They may lie about their experience or they may buy fake degrees and credentials to look more knowledgeable than they really are. These tactics work because they know you will not commit the time it takes to validate their credentials.

Performance is another source of manipulation. You ask the advisor, “What can I expect to earn each year if I select you?” The advisor says “My clients have averaged a 15% rate of return for the past five years.” Again, the advisor knows you have no way to validate the accuracy of this information.

#4 Omission

Misrepresentation is what they tell that is not true. Omission is what they don’t tell you. It stands to reason advisors do not volunteer information that will cause you to reject their sales recommendations. They can’t make any money.

Omission is why transparency with documentation is so important. You have the information you need to make the right decision. You do not have to ask the right questions. And, you have a written record of the advisor’s responses in case there is a future dispute.

#5 Expenses

An acid test for any advisor is his willingness to fully disclose all of the expenses that will be deducted from your assets. Advisors withhold this information for two reasons. First, there can be five or more layers of expenses and every layer of expense reduces the net performance of your assets. Second, the advisor may not want you to know the amount of income he derives from your assets. In particular, if he is making a lot of money for very little work.

He will withhold this information until you ask for it. Then he may provide partial expense data and hope you do not know the difference. And, the information will be verbal so you have no record of what was said to you.

Your Financial Security 

Selecting a financial advisor is a risky proposition. You should make objective decisions that are based on documented facts. You should avoid subjective decisions that are based on personalities and verbal sales pitches. You should be in control of the process and not the advisor. You lose when advisors control all of the information you need to make the right decision.