Conflicts of Interest

/Tag:Conflicts of Interest

Do You Believe Your Current Financial Advisor Always Tells the Truth?

There is a large number of investors who believe anything their advisors tell them because they have personal relationships. They like their advisors and they inherently trust people they like. And, investors do not question the advice of people they trust. This is a license to steal for unscrupulous advisors who take advantage of investors who trust them to maximize their own incomes.

It is unfortunate, but a lot of investors have trouble believing people they like will take advantage of them to make more money. Ask yourself this question. Do you really believe your current advisor would voluntarily provide information that would get him fired – for example, bad performance, high expenses, excessive risk, or conflicts of interest? The answer is absolutely not! His income would stop and you might file a complaint with one of the regulatory agencies. If the abuse was bad enough, it could cost the advisor his job. It is much safer and rewarding for the advisor to withhold this information from you.  […]

The Accidental Solution to the Retirement Problem

The greatest thing about defined-benefit plans was that workers didn’t have to do anything other than show up for work to get the desired result: a guaranteed income for life. It was a good system in that most workers didn’t want responsibility or control, just a secure retirement.

The defined-benefit plan is gone, and it’s not coming back. It’s been replaced by the 401(k), an accidental solution to the retirement problem. As a replacement, it’s been a dismal failure. The worker is still just looking for a secure retirement with little to no input required. Unfortunately, very few workers are on track to get that these days. […]

Employers: It’s Time to Get Serious about Your Fiduciary Obligations

The employer’s obligation for the pension plan doesn’t end when they write the check. It begins.

Without any thought or planning the 401(k) has become America’s pension plan. The days of guaranteed retirement income for life are long gone, and along with them the financial security that the traditional pensions plan provided.

The 401(k) solution is deeply flawed. The widespread failure of 401(k) plans to provide adequate retirement income security for American workers has caught the attention of the courts, regulators, the administration, Congress, academics and participants. […]

Viva La Diferencia! [Consider a Fee-Only, Independent, Registered Investment Advisor]

Fee-Only, Independent, Registered Investment Advisors are an entirely different animal than the brokerages, broker-dealers, insurance companies, and banks that have traditionally dominated the investment advice market.

The traditional commission based sales model is fatally flawed and cannot be fixed. It’s almost impossible to provide fiduciary standards of investment management if the advisor is commission based. External influence and production pressure make any recommendation suspect. The investor’s best assurance of objective advice is the ironclad separation between the advice and brokerage functions. This is why we think fee-only compensation is so important. Do you really want to pay for tainted advice? […]

Avoiding Advisor Risk

Market Risk and Behavior Risk are well known and frequently discussed. But, there is another type of risk that is often overlooked; The Advisor Risk.

Investors that recognize that they don’t have the time, knowledge or inclination to deal with market risk, and/or the discipline to deal with their own behavior risk may seek advice, and unwittingly run into a third level of risk: The risk that their advisors are either not working in their best interest and/or are incompetent. This third risk is little discussed or appreciated. But, advisor risk is not trivial. Countless investors that delegated their investment decisions to so-called professionals have been devastated during the recent bear market. […]

Does the Conflict-Free Financial Adviser Really Exist?

I read a great article this weekend that appeared in the Your Money section of The New York Times. The article was titled “The Perils of Finding a Conflict-Free Financial Adviser” and was written by Tara Siegel Bernard. It is pretty obvious, by the content of the article, that Bernard knows advisers and the tricks of the trade.

Her article starts by describing how difficult it is to identify advisers who are required to put investor interests ahead of their own. They are out there, but they are hard to find. These advisers are registered as Investment Advisor Representatives (IARs), which make them financial fiduciaries who are held to the highest ethical standards in the financial service industry. Perhaps one out of five advisers are IARs. […]