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Trusted Advisor versus Salesperson

When you are looking for a good broker or investment advisor, the following are a few ideas. Look for ones that have your best interest in mind. Make sure trading is to achieve your goals—not theirs. Make sure they have the necessary expertise and licenses in the financial areas you think are important. If they don’t have the licenses, they cannot sell you the securities. Make sure that they don’t trade a lot—that they don’t “churn” your portfolio. It’s not what you make, but what you keep after all costs, taxes and inflation that makes you wealthy.

Look for brokers with integrity, intelligence, and efficiency. Make sure they are up-front regarding all costs and commissions. If they will not tell you their commission, go somewhere else. Look for brokers with experience in both up and down markets. Generally, this type of experience is not found in someone who cold calls you on the phone. Make sure your broker listens. Ensure that they spend the time with you to know your investment philosophy and read your investment plan. If not, go somewhere else. Finally, choose a broker that has a reputation for allowing customers to say no without pressure. If you ever feel pressure to make a trade, get another broker.

There is a difference between a trusted financial advisor (TFA) and a salesperson. A trusted financial advisor has your best interest at heart, while a salesman has his or her best interest at hear. The following are a few differences that you should be aware of.

  • A TFA follows a process to help you create a comprehensive financial plan. A salesperson has a technique for making a sale and placing a trade.
  • A TFA is interested in the things that are important to you. A salesperson is interested in making small talk, making you feel comfortable, and then making the sale.
  • A TFA requires you to bring all financial data to the first meeting but does not require you to disclose information you are not comfortable with sharing. A salesperson does not require you to do anything but show up and asks probing, personal questions that are designed to make you feel uncomfortable so you will buy the products he or she recommends.
  • A TFA expresses interest in you and frequently refers to the work you have done so far in your financial plan; a TFA makes an effort to understand you and your goals. A salesperson refers to the possibility of your impending demise, the need to protect your family, and so on, in an attempt to scare you into buying a product.
  • A TFA meets in a professional environment with all of the financial decision makers. A salesperson will meet with anyone, anytime, anywhere for “convenience.”
  • A TFA tends to inspire you. A salesperson tends to prey on your fears and insecurities to pressure you to buy specific products.
  • A TFA will not allow you to talk him or her into selling you a product that is not appropriate for you, even if you insist. A salesperson will sell you anything you want to buy or will redirect you to a preferred product that gives him or her a higher commission.
  • A TFA will sell you products that are most suitable for your situation, regardless of whether the TFA is compensated or not. A salesperson will sell you products that generate the highest commission for the salesperson and the salesperson’s company.
  • A TFA works with you even during times when you are not doing much trading. A salesperson only works with you if you are generating commissions.

As you review your experience with brokers or financial advisors, you can come to understand the type of advisor you were working with. The key is to work with a trusted financial advisor, whether that person is registered as a financial advisor or a broker. (Main ideas for this section are from Jason Payne; Payne Financial Management; Orem, Utah; and Bill Bachrach; Values Based Financial Planning; Aim High Publishing; San Diego, CA; 2000)


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