After 43 years as an entrepreneur in financial services, I now think of myself as officially retired. But that doesn’t mean I’m divorced from what kept me busy those 43 years and provided a living wage.
It’s just that my focus today is very different from what it was when I was trolling for new clients.
These days I’m the author and publisher of an online school that teaches others a new way to think about and plan for retirement. To the extent I’m compensated for my time and skills, it’s when someone finds the school, decides there is value to be had for enrolling, and sooner or later I get a percentage of what they spend.
Meanwhile, my active and former colleagues across the country are busy either working for corporate America, working for a company they’ve created, or are otherwise engaged in finding new clients and looking after existing clients.
All this, hopefully, falls under the umbrella of professionalism. This is where you use your skill sets to provide value to others in exchange for compensation. Which takes many forms and is the focus of this blog post.
If you are an attorney, the same framework applies. If you are a CPA, or an architect, or a physician, the same thing. We who call ourselves professionals went to great lengths to become professionally qualified with the expectation that if we properly take care of other’s needs, we’ll be compensated for said services.
Here’s the rub when it comes to financial services. If you’re a consumer, you really have no idea how much you’re paying. That’s because for the past however many years, the financial services industry doesn’t really want you to know what it costs.
Take the typical mutual fund that your financial advisor at XYZ Bank wants you to buy from his/her firm. It may be the greatest mutual fund since sliced bread was invented, but it’s not being sold to you because XYZ Bank necessarily thinks it’s in your best interest to own it. It’s most likely because management of said bank has ‘encouraged’ it’s corps of advisors to promote the sale of said mutual fund because the bank is more generously compensated when that happens.
Does this mean that you are being sold a bill of goods? No, not necessarily. It might very well be in your best interest, but chances are that was not the primary motivation behind the suggestion from your advisor to use that mutual fund and not another.
It’s completely legal for XYZ Bank to take advantage of you if you are willing to be taken advantage of. And we in financial services are well aware we typically speak a language that is difficult, if not impossible, for the average person to understand. And we’re happy to tell you ‘it’s the best solution for your needs’ and not be lying. We too are sometimes misinformed.
Part of the solution to this issue is knowing how to ask the right questions of the advisor you are talking with. The problem is not that they are paid; that’s very appropriate and necessary. What’s problematical is there are costs you are paying that are typically hidden. Lobbyists persuaded regulators that said costs need not be revealed to consumers. And even if you learned what they were, you might still agree it’s in your best interest to pay those costs.
If you asked Bernie Madoff if his advice was in your best interest, I don’t doubt that his answer would have been “Yes!”. Despite that, he managed to bilk people out of an estimated $65 billion.
Your challenge is not to learn the financial language used by me and my colleagues. Your challenge is to use the people skills you’ve been learning since you were a small child and when you ask a probing question of your advisor, what does your gut tell you? You must ask them early on, before you hire them to help you, this question: “If I agree to become your client, will you act as a fiduciary and be held accountable to that standard?’ If there is a hesitancy, or if your instinct says ‘probably not’, then be prepared to walk away.
There is a fairly lengthy lesson in one of my online courses that attempts to guide you through this process. Don’t be afraid to ask questions despite the sometime awkwardness that might follow. It’s your money first, and there’s no reason to give it away, unless that’s what you have in mind. You should expect to pay for professional services. But the onus is on you to ask the right questions first.
Tony Kendzior \ July 17, 2019 \ Comments inspired by: https://tinyurl.com/y3948r8u