E-mail exchanges and conversations with thousands of my readers over the past few years have exposed me to an unusual and at times odd behavior when it comes to money and investments.
One thing I found was that some investors on one hand are trying to save pennies while on the other wasting dollars by the thousands without even being aware of it, or at least not thinking about it. To me, it’s an oddity when you have to convince someone that paying an upfront load is a total waste of money in today’s environment of low cost ETFs and no load, no transaction fee mutual funds.
Yet, at the same time, that same investor has just spent several hours of his time online trying to save $50 on his next vacation trip or his new PC.
What gives?
For the most part, I think it is just lack of understanding of how brokers make their money. Or annuity salesmen, for that matter. It’s an abusive world out there, and if you don’t educate yourself, you’ll end up holding the short end of the stick.
Most every investor is interested in the same thing when it comes to investment advice: To get an unbiased, honest opinion and receive some guidance without financial motivation based on the product involved.
Sounds simple and yet so difficult. I am not trying to toot my own horn here, but the key is the relationship between you and your advisor. If you engage the services of a fee-only advisor, you can be assured of three things:
1. He is only paid the fee rate you agreed upon
2. He has taken an oath to act in the client’s best interest
3. He does not earn money off any particular product, is not tied to a particular investment firm and is thereby free to offer unbiased advice.
Today, that’s as close as you can get to someone whose financial priority is you and not their own pocket. Compare that to a commissioned salesman who heavily promotes a company sponsored ‘loaded’ product and you know (or you should know) that if you buy, he stands to make thousands of dollars in upfront fees.
How is that for conflict of interest?