Hidden
fees and commissions: For more complicated and
longer-term investments, which again are likely to be
repackaged VULs, like limited partnerships, the financial
planner or advisor firm may collect large management
fees.
More commonly, larger financial
planner or advisor firms may pay financial planners or
advisors more for selling the firm's proprietary insurance
and mutual fund products. Most likely it will consist
of a mutual fund owned within a VUL
Your financial planner or
advisor gets a residual payment in addition to his commission
on most of these policies. This means he or he or she earns
a percentage as long as you continue to own the policy.
Insurance as the
only solution: If you were a financial planner
or advisor and your boss paid you 80% commission on a
first year policy and then a residual income of 10% commission
each year after, wouldn't you find reasons to find an
insurane solution to every single financial challenge
your clients face?
2. A financial planner or
advisor's main qualification is that he can sell
Other types of incentives
also increase conflicts of interest with your financial
planner or advisor. When a financial planner or advisor
transfers to a new firm, he may be offered, in addition
to a signing bonus, a higher sales commission for the first
month or year.
You can imagine the incentive
that financial planner or advisorhas to sell as much product
as possible before her commission drops to a lower percentage.
Similarly, at the end of
the year, many firms pay their financial planner or advisors
based upon the percentage of commissions they generated
that year.
The more commissions earned
that year, the more the financial planner or advisor generates,
the more money he is paid at the end of the year. There's
a natural race to try to generate more commissions at the
end of the year based on this higher payout.
One of the worst examples
is the sales contest. Financial planner or advisor firms
will load financial planner or advisors with gifts, including
trips or just extra money for selling more of a particular
product during a given time period.
Rarely, if ever, are you
the client made aware of this. Even the most naive investor
would think twice about buying an insurance package if
he were told that one of the reasons the package is being
suggested to him is because some financial planner or advisor
can win a trip to the Grand Caymans.
3. Your financial planner
or advisor puts you at way too much risk
Financial planner or advisors
are famous for telling you to systematically buy and hold
securities no matter the market conditions. This is because
they care only about selling you a product in their inventory
and because they don't understand the market contions themselves.
Testing this buy and hold
strategy is as easy as looking at a 10-year NASDAQ chart.
If you had bought in 1997 you would be sitting on a loss
by 2002.
If you were unlucky enough
to have bought a mutual fund in 2000, and many were because
financial planner or advisors had big incentives then to
unload their inventories, you would still be suffering
a loss seven long years later.
A simple treasury bond would
have outperformed this record and would have at least kept
up with inflation
4. Anybody can be a financial
planner or advisor
Anyone can be a financial
planner or advisor, including your milk man or your used
car salesman. All it takes are a few simple-to-get government
liscences. Many financial planner or advisors enter a five-day
study course, pay their fees, take the tests and it's off
to sales training.
Yes, that's right. Sales
training. Financial planner or advisors don't have time
to really learn real financial planning strategies when
sales quotas are beckoning.
As crazy as it sounds, literally
no other qualifications are required. Financial planners
or advisors are not required to be college graduates. More
often than not, financial planners or advisors are not
trained beyond the simple insurance repackaging strategies
their firm pushes them toward and they have no idea what
the best strategies really are for your money and your
financial planning needs. What are important are sales
quotas and commission rates and that makes up 90% of their
focus.
Do you want to take financial
advice from your milk man? The fact is, your milk man really
can become a financial advisor or planner and could very
well be the guy managing your money if he only decides
to go out and take a couple of tests. But since your milk
man doesn't care about your finances any more than you
care about his, we have one simple question to ask.
Why not you?
No, we are not suggesting
you go out and take the Series 7, 63 and 65 and become
an insurance salesman/financial planner or advisor. We
are suggesting, however, that you take more of an initiative
in managing your own future. You are the only one who can
look out for your own best interests without any troubling
conflicts of interest.
You are the only one who
does not have a conflict of interest. And you really can
do it. It's not as difficult as you may think. It is possible
to earn outstanding returns on your money, manage risk,
and avoid the hidden pitfalls of buying at the top of the
market or selling at the bottom the way your financial
planner or advisor may inadvertantly advise you to do.
Stop accepting paltry returns
that are eaten up by your financial planner or advisor's
commission and conflicts of interests: Your financial planner
or advisor tries to get you to accept returns of 7% - 12%,
which could be ok, but why should it take you a year to
earn them?
You work hard to earn your
money, but how much time do you spend actually managing
your money? The simple truth is that you spend 40 hours
a week or more going to work. You spend a an hour or two
per week taking care of the yard. You spend an hour or
more per day preparing dinner. You spend two to three hours
per day watching TV. How much time to you spend planning
for your future?
Do you know that if you are
willing to put aside just a few minutes a day that you
can start earning returns on your money that dwarf anything
your financial planner or advisor promises you? Do you
know that by spending just a few minutes each day that
you can manage your risk much better than your financial
planner or advisor can? It is no secret. The strategy is
simple and if you take the time to learn, it will make
sense to you.
About
the author:
Researchers at Securities Research Services are developers
of the Smart Money PrincipleT This ingenius money management
strategy ensures that our subscribers investment accounts
continually grow by quickly locking in gains and strictly
limiting loss. The genius of the strategy is that it actually
forces your account to always continue growing, never allowing
it to slip backward.
http://www.srsfinance.com/Financial_Planner_Advisor.html
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