Is your financial advisor working in your best interests?

Maybe it’s because I come from a small town where everyone knows everyone (and eventually everything about everyone!), but I have a very low tolerance when I hear of friends and family being sold sub-par financial products with complicated jargon. Every story seems to be the same: a fast-talking financial salesperson with no training, no education in financial planning, and no experience is peddling complex financial products that even they don’t fully understand.

These financial sales pitches irk me. A lot. My reaction has as much to do with the fact that I don’t want the people I care about to be swindled as it does with the fact that these commission-driven sales are an insult to the profession I’m so passionate about: personal financial planning. But let me back up before I rant any further to ask—and answer—two important questions.

Why does it matter so much to me? And why should it matter just as much to you?

For me, my education laid the groundwork. Prior to graduating from high school, I wasn’t sure what I wanted to study in college. When I received a letter in the mail inviting me to apply for a scholarship through the Networks Financial Institute, I simply couldn’t say no. Created through a grant from the Lilly Endowment, Inc., the scholarship program offers full-tuition, four-year scholarships to Indiana State University for students majoring in business with the intention of pursuing a career in financial services. The short story: I applied and was granted the scholarship. But I still didn’t have a clear career direction. Everything changed when my Financial Planning courses kicked into full gear in my junior year and I began learning all of the pieces of the puzzle: taxes, estate planning, retirement planning, insurance, and more. Suddenly I could see what a difference personal financial planning could have on people’s lives—and I knew that with training and experience, I could help make that happen. I had found my true passion.

Fast forward to today. After graduating from ISU, I studied and passed the rigorous CFP Board exam to earn my designation as a Certified Financial Planner™ (CFP®) professional—the gold standard for any financial advisor. Similar to the Bar Exam for attorneys, passing the CFP® exam requires years of coursework and a proven understanding of the personal finance principles required to help clients build stronger financial futures using a balanced, long-term strategy based on their own needs—not someone else’s sales goals. Even though I am now a fully certified CFP® professional, I still work side by side with our senior financial planners to gain even more experience before leading client relationships myself. My time will come, but I’m still learning.

With that background, you can understand why I get upset when I hear about anyone being pitched commission-based financial products. Here’s why it should matter just as much—if not more so—to you:

In most cases, these products are being recommended with no knowledge of your unique financial needs or goals. It’s doesn’t matter if the product is good for you—all that matters is that the sale is good for the seller. That’s a far cry from Fee-Only Registered Investment Advisory (RIA) firms that operate as fiduciaries, receive no product commissions, and are required to always act in the client’s best interests.

At Market Street, we operate under this standard, and it makes an important difference to our clients. For example, say we’re working with a young couple. To create their financial plan, we look at their current financial situation and their long-term goals and needs. In the process, we determine they need a $1 million life insurance policy. A financial salesperson might eagerly recommend a whole life insurance policy to meet this need because it generates a higher commission. But we know that not only would the premiums for such a whole life insurance policy be very expensive, but the policy would also include higher fees and commissions that could have a negative impact on the couple’s long-term financial outcome. A much better option for our client (though certainly not for the commission-based financial advisor!) would be a term life policy that provides the coverage they need today, while freeing up income to invest and build a stronger future. Because we’re working in the best interest of our clients, we’re able to recommend the most appropriate option for them.

I can’t really blame the people selling these products. They’re just doing their job. Unfortunately, the requirements to do that job are often minimal. Case in point: I recently saw an ad advertising an opportunity to start your own insurance agency. The job requirements were straightforward: “NO INSURANCE EXPERIENCE NECESSARY.” I don’t know about you, but I would sure like the financial advisor who is supposed to be looking out for my best interests to have actual real world work experience—and a whole lot of it!

To find a trained and experienced financial advisor that takes your unique needs to heart, be sure to ask these five key questions:

  1. Is the advisor a Certified Financial Planner (CFP®) professional? Be certain the person you choose has a trusted credential such as a CFP, CPA/PFS or ChFC.
  2. Is the advisor a fiduciary? Fiduciaries are required to work in your best interests 100% of the time.
  3. Does the advisor sell commission-based products? Avoid unwanted conflicts of interest by making sure your advisor is working for you, not a sales organization.
  4. Is the advisor experienced? Working with a professional with at least 5+ years of experience brings insight to the table.
  5. How is the advisor compensated? A fee-only advisor receives no commissions, and is compensated only for the services they provide to you, the client.

No matter what kind of financial help you’re seeking, do your homework and be sure you are placing your trust in a true professional who will take your entire financial life into consideration—not a commission-based financial advisor with “no experience necessary.” Your future self will thank you for your diligence!


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