Financial planners = Sales people?

I have a friend who has spent his career working as a sales rep/account executive for a variety of computer companies and wireless phone companies. As a result, he is ACTIVELY being recruited by one of the biggest insurance companies in Canada. For what, you may ask? As a FINANCIAL PLANNER! Makes complete sense, right? It does actually; as a result of his experience, he is a very charming and successful salesperson. No knowledge or experience in anything money related required! The reality is that the majority of financial planners in the industry today are salespeople. Their livelihood depends on the number of products they can sell you (yes, mutual funds and insurance policies are products) and the more complicated the product, the better the commissions on it.

I had a financial planner when I was younger. Well, I dutifully maxed out my RRSPs every year and sent the money to the lady at the bank who purchased mutual funds on my behalf. I never actually met the lady. Year after year, paycheque after paycheque. I was too committed to my work to really think about what my money was doing in that RRSP, but she was the advisor, she was the professional, she knew what she was doing, right? One fateful day a couple years ago, I opened my statements and thought, “boy, that seems low.” I’ve been contributing every year, but the balance just seemed off. I sat there, and realized I didn’t even know how much money I had put into the account! If I didn’t know how much money I put in, how in the world was I supposed to know how much money I had earned? So I sat down and figured it all out. Not only had I not made any money at all, I had lost money. Almost 15% of what I put in. Wait a minute. I knew there were inherent risks in the stock market, but I didn’t know if this was reasonable or not. I had no idea what I was invested in, what my risk tolerance was, or even why they were buying and selling different funds every year. It was then that I started to learn anything and everything I could about investing. I made the mistake of relying and trusting someone who I perceived as being a professional, and the result was life changing. I just felt dumb. Really, really dumb. I busted my ass for that money, and I didn’t even respect it enough to know what I was doing with it. To be fair, I could have made an appointment to go meet up with them, although the message would be the same. Stay invested for the long-term; you’re young, the market will bounce back. The stock market will move up and down. But that required actually walking into a bank. And you know how I feel about banks. Aside from PCF of course.

This is why I don’t want to become a financial planner for a bank or an insurance company. You are ‘supposed’ to be suggesting products that are best suited for your clients, but your livelihood is dependent upon how well you can sell the in-house investment products your employer manufacturers. I don’t want to make a blanket statement saying all financial advisors working for banks or insurance companies are bad; I just want you to be aware of the relationship that you will have.

So how do I see the world of financial planners? Let’s say there are 10% that are really, really good planners. They have their client’s best interest at hand and sincerely want to help them meet their goals and have them ready for retirement. They keep apprised of the business and financial world and have the credentials and experience to back up their advice. Then there are the 5% who are out there to get your money. They are sleazy and ambitious, and will sell you the most expensive products they can to get as much money as they can from you. And the rest are in the middle. Some really do believe they are helping you, but they don’t really understand the products or can afford to own it themselves. Most are just trying to make a living. Although the amount of money they make pales in comparison to the money that the companies who manufactures the products are making.

So, if you are looking for a financial advisor, or are currently working with one, I recommend you ask the them the following questions:

Working with a financial planner is great if they are able to offer you guidance and reassurance that your money is being utilized and allocated properly. But this does not replace your own education and knowledge about money. You don’t need to know everything there is about investing and money, but you need to know enough to make sure you’re not getting screwed. No one cares more about your money than YOU!

So, do you currently have a financial planner? Are you looking for one? What are your own perceptions of financial planners?


1 Comment (+add yours?)

  1. Trackback: Mutual Fun…ds – Part I « Vix's Money

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