Are Financial Advisors Good or Bad?
What is your opionion? Are financial advisors worth their expense. I would hazard that while some are no doubt brilliant (and hopefully worth it) most people who claim to be “advisors” are in fact nothing other than salesmen (or saleswomen).
The vast majority are, in my opinion, pushing the latest products from their head offices and are really just watching their own bottom line. In otherwords they are recommending the product that gives them the most commission. To be fair the salesman will usually try to find the best catagory of products for their clients, but will typically end up recommending the highest commission product within that catagory.
Most of these salesmen are not bad people (Bernie Madoff and Earl Jones are the obvious exceptions) it is just that they are set up from the get go to promote popular and expensive products from their head offices. Keep in mind they get paid based on commission – not fee for service. For an ‘advisor’ to survive the first few years of business they must maximize their commissions until eventually their renewal commission will allow enough of a buffer that they may actually recommend a product that is not the highest possible commission.
In the land down under (Oz) they are moving to a fee for service pay structure and getting away from commissions paid by the companies that provide the financial products. With commission based pay there is a real conflict of interest no matter what the salesman says. Canada needs to move in this direction as well.