SYM Financial Corp Blog

Who is your financial advisor really working for? Part 3 of 3

People like to ask financial advisors for “the next hot pick” in the stock market. Though a true professional won’t venture a serious guess to that inquiry, you can be sure he or she can offer something more valuable than a stock tip. Parts 1 and 2 addressed the first four of five questions people really should ask when coming face-to face with a wealth advisor or anyone selling investment products. The answer to the fifth and final question will quickly reveal what kind of investment provider you are dealing with, and whose interests might take priority in any future relationship. Not a SYM client? Put your current advisor to the test.

The fifth and final question is one of critical importance:  Will you accept the responsibility to put my best interests first? 

In the investment industry (and others), the responsibility to put clients’ interests before your own is considered a fiduciary duty. As unbelievable as it sounds, most advisors were never required to adhere to this principal. In fact, it’s still extremely difficult for prospective clients to know what they can expect of a relationship with their financial professional should conflicts of interest occur. This issue was pressing enough that in March 2016, the Department of Labor (DOL) ruled that all advisors must become a fiduciary, though their definition still allows for conflicts of interest to exist if disclosed.


In contrast, financial advisors who identify as Registered Investment Advisors (RIAs) have always pledged a code of conduct more stringent than the DOL’s new requirements. Their compensation is fee-only or fee-based, meaning their pay is linked to serving clients uncommonly well, not hawking an investment product.


When considering a new advisory relationship (remembering that all advisors will consider themselves to be fiduciaries after January 2018, the final implementation date for DOL requirements), start by asking the advisor what having a fiduciary responsibility to clients means to him. Ask what his fiduciary duty looks like in action, and if his method of compensation might introduce conflicts of interest to the relationship. If you aren’t comfortable with the response, we recommend you keep looking.


The sad reality is, much of the financial industry is a thinly veiled sales institution. Because we are humans, we can become emotionally impaired by those things which have happened to us most recently. Market or personal disorder can make fertile ground for salespeople with “products” that make us believe we are well-protected. Consider fixed annuities, cash features like CDs and high yield deposit accounts, and “no risk no loss” promotions. Are these inherently bad products? Not necessarily.  But are they the best places to invest your money? NOT NECESSARILY. The problem occurs when a financial salesperson (making his mortgage payment by way of sales commissions) convinces both of you that they are!


A true professional will deliver guidance and results to steady you through thick and thin. He or she will help you sidestep the errors in judgement that might trigger a desire to buy and/or sell at the wrong time. A financial salesperson, sometimes unwittingly, will offer only the tools and resources at his disposable, however appropriate or inappropriate they may be. As they say, “When all you have is a hammer, everything looks like a nail!”


The next time you meet a financial advisor, forget about products. Don’t ask for a “magic bean” to help you avoid taxes, access market upside without downside, or protect you from what happened yesterday. Instead, ask the five thoughtful questions above. While a salesperson will have slick responses (or worse, try to sell you the magic bean!), a professional advisor will provide real food for thought.


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Who is your financial advisor really working for? ...