We have been programmed to believe we need Wall Street’s expertise and services. Major advertising campaigns, slick PR, and 700,000 salesmen have brainwashed us into believing Wall Street has exceptional financial expertise that will help us achieve our financial goals. What if it is not true?
Their level of success can be attributed to peoples’ need to believe there is a source of exceptional financial knowledge that produces superior results. This pre-disposition makes us vulnerable to sales pitches that are designed to tell us what we want to hear. Who does not want a comfortable secure retirement?
Act of Faith
Our decision to turn our assets over to Wall Street is based on an act of faith. There is no proof we will achieve our goals and there are guarantees. There may be verbal promises that create expectations, but there is no record of the “verbal” promises.
The most successful financial advisors are the ones who can convince us to buy the story without any proof or guarantee it will actually happen.
Wall Street wants us to believe salesmen are financial experts. It knows we do not question the advice of experts (doctors, CPAs, attorneys). We listen to experts because they have specialized knowledge and services.
Creating this perception helps their representatives reduce our sales resistance. Once we believe they are experts it is easy for them to sell us the products that make Wall Street the most money.
They wants us to believe our financial interests always come first. At the same time, it is spending millions of dollars to fight higher ethical standards that would require advisors to actually do that. Wall Street makes more money when ethical standards are low and it makes less money when ethical standards are higher.
Wall Street wants you to believe higher expenses do not matter. The expenses will be offset by superior performance. For example, 2-3% of expenses do not matter if your assets are producing 15-20% rates of return. Of course, expenses are real and future performance may not happen.
What it gets down to is the sales skills of the advisors. Can they convince us to buy what they are selling and pay high expenses without track records or guarantees?
Wall Street would like us to believe big firms produce better results than small firms. The Internet has leveled the playing field. Sure, big firms have more analysts, but experience shows they also have major conflicts of interest.
Size, as measured by assets, can be a reflection of a firm’s marketing prowess and not superior results. For example, a Wall Street firm controls $1 trillion because it employs 15,000 highly trained salesmen.
If it was as good as it purports to be it would not need 700,000 sales representatives selling its products. It would not have a history of cheating investors to maximize revenue and profit. People would be lining up down the street to buy Wall Street advice and products.
7 Rules Protect Your Interests
Our alternative is an independent financial advisor that is not controlled by one of the big firms. There are seven rules we should follow when we select financial advisors and firms:
1. Learn more about advisors before we buy (www.PaladinRegistry.com)
2. Require documentation for sources of competence
3. Check the advisors’ compliance records (ethics)
4. Trust what you see, not what you hear
5. Require monthly performance reports
6. Pay close attention to expenses
7. Pay fees to advisors for their advice (not commissions)