Your physical health is more important than your financial health. However, financial health is a close second. Financially secure people live happier, healthier, longer lives.
Two industries threaten these two important types of health. Who is going to protect you from their predatory business practices?
Smoking is a glaring example of a source of major health risks. The industry lied to consumers for decades to protect company revenues, profits, and share prices. And, don’t forget the executives who made the decisions to hide their products’ risks. They earned millions while 400,000 Americans died every year.
After decades of controversy and millions of unnecessary deaths, our esteemed government finally took action when it required the printing of warning labels on packages of cigarettes. This warning was supposed to help smokers make informed decisions, but it was still their responsibility to protect their physical health.
The good news is Wall Street does not kill 400,000 people per year. The bad news is Wall Street damages the financial health of millions of investors every year. You may remember the dot.com bubble that imploded in 2000 or the mortgage bubble that practically brought the economy to its knees in 2008. Both debacles produced losses of 40% or more. Some investors lost everything. Meanwhile, Wall Street companies, executives, and financial advisors flourished.
Like tobacco, Wall Street is a major special interest group that spends more than $300 million per year on lobbyists who control the politicians who make the rules that regulate the industry. Wall Street controls its regulatory environment in a way that big tobacco could have only dreamed about.
You Have To Protect You
Wall Street is not going to protect your interests. It makes too much money the old fashioned way – taking advantage of you. The regulatory agencies (FINRA, SEC, States) are not going to protect you – they do not know you exist. Only you can protect your financial interests – just like only you could stop smoking.
You are not going to change Wall Street – remember, it is too big to die. But, you can control how you interact with Wall Street’s distribution system. You control whom you select to be your financial advisor. This is real power if you decide to use it.
Financial advisors are the source of bad financial advice and many of them sell bad products to investors to make more money. They do not have warning labels, like a pack of cigarettes, but they should. Bad advice is hazardous to you financial health like smoking is to your physical health.
There is a simple solution. You can exercise control of your financial future by requiring financial advisors to disclose information that is selected by you. This early warning system helps you avoid problems. You have the information you need to select the best advisor and avoid the bad advisors.
The Warning Label
The industry does not volunteer information that has an adverse impact on revenue. You have to ask the right questions. That is the role of your warning system. It is a simple one-page document that requires five types of advisor disclosures that help you protect your financial health.
Make sure you get advisor responses in writing. Verbal information is too easy to manipulate. Advisors can misrepresent and omit information. And, no written record means you will lose any future disputes because you do not have any documentation.
Your warning label requires the following information:
Competence: Require advisors to document their education, experience, and certifications. All advisors claim to be experts. This verbal sales claim is not true more than 75% of the time.
Ethics: Require them to document their records of compliance with industry regulations. All advisors claim to be trustworthy.
Fiduciary: Require advisors to acknowledge in writing that they are acting in a fiduciary capacity when they provide financial advice for fees.
Expense: Require advisors to document all of the expenses that will be deducted from your accounts. They should also disclose their type and amount of compensation.
Services: Require advisors to document the services you receive for the expenses. This requirement makes it easy to compare advisors to each other.
You saw what happened when the tobacco industry controlled all of the information that consumers relied on to make smoke or don’t smoke decisions. The same thing happens when Wall Street controls information. It uses control to maximize revenue.
It is time you take control of your financial health the same way you took control of your physical health.