Your Broker Is Just As Confused As You Are

Ever wonder if your broker really knows more than you do about investing? SmartMoney Magazine did, that’s why they sent a reporter to 8 brokers within walking distance… just to see what advice she’d get. From SmartMoney (emphasis added):

She presented herself as a divorcee who had received a legal settlement and needed advice about investing, tax and estate planning, college savings, retirement and insurance (all true, by the way). She left out only that she would be writing about the experience. Of course, our field test was hardly scientific. But we found out that in their new roles, many brokers seemed just as confused as their customers. The good news: We picked up a lot of attractive graphs and pie charts, and a couple weeks’ worth of free coffee.

My, that’s comforting. Sadly, the article didn’t come to many helpful conclusions. No broker performed significantly better than any other, so you’ll just have to shop around for someone who seems like they know what they’re doing and then do some research about how they get paid and what their title means. SmartMoney did say that they got the most accurate advice from a “total jerk.” Hmm.—MEGHANN MARCO

Many Brokers Offer Financial Advice They Shouldn’t Give [SmartMoney]


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  1. BillyMumphry says:

    This comes as no shocker. Financial advisers are basically modern day encyclopedia salesman. These are not the all-stars of the business world.

    In my series 7 class (i am not an FA), there were 4 of us non-FA’s and about 24 soon-to-be financial advisers. Those 24 might as well have worked at waffle house. The brokerage houses give these community college grads a bunch of marketing material and let them draw a penance and send them into the woods.

  2. MaineCoast says:

    The truth is far simpler than most will have you believe.

    A recent very good book on this topic is: “The Big Investment Lie: What Your Financial Advisor Doesn’t Want You To Know” by Michael Edesess.

    One of the best related books I have ever read on the subject of money is: “Seven Stages of Money Maturity: Understanding The Spirit And Value of Money In Your Life” by George Kinder.

    Ps. LOVE your website, keep up the good work.

  3. xkaluv says:

    Agreed, watch out for yourself out there. I use Dave Ramsey (a financial councelor) for my guide… he has a pdf guide on his webstie…

  4. Notsewfast says:

    Dave Ramsey has some good ideas on getting out of debt, but his day-to-day techniques are seriously flawed.

    This is not a surprise, if a random client walks into the firm I work for, they are automatically picked up by our lowest earning “Waffle House” FAs. The best brokers don’t take people off the street because there is no money in it.

    A divorcee who maybe got $250,000 is small potatoes to a broker who manages $1 billion book of business and he would not bother. New clients for smart brokers come from referrals from other high net worth clients.

    This experiment is subject to a major sampling error. While I agree that many FAs don’t know what they’re doing, making the judgment that ALL of them are idiots from a conversation with the first person you talk to is like assuming gambling always pays off because the slot machine at the front of the casino pays out frequently.

  5. Imhotep says:

    They’re called “Brokers” for a reason!

  6. Brian B says:

    The first mistake of the article and many of the comments is the assumption that a broker is the same as a financial advisor. There is a huge difference between the two.

    A broker cares only about transactions. That’s how he gets paid.

    A true advisor is a consultant who sits on the same side of the table as his client and provides advice, not a sales pitch.

    As a CFP, I’ll admit that most people COULD invest/buy insurance/prepare a will/etc. on their own. They are capable of doing it. But most either don’t have the time or discipline to follow through.

    That’s the value of a professional advisor. It’s not just about investment performance.

    Secret Agent Man makes a good point. Walking into a store front is no way to find a quality advisor. Get a referral from someone you trust.

  7. BillyMumphry says:

    @Brian B:

    sitting on the same side of the table and providing “advice” = sales pitch

  8. riggs says:

    Look for professional designations-such as CFP, ChFC, etc. Don’t pull out the phone book and pick a name out. Ask friends or family if they recommend anyone. And if still in doubt, go check out their record here:

    You can see any disciplinary actions, complaints, basically their whole history. Searchable by individual name or firm name.

    And of course…ASK QUESTIONS. Someone who’s legit won’t be dismissive or patronizing. A good advisor will take the extra time.