Yesterday I Mystery Shopped for a Financial Advisor


ImageYesterday I mystery shopped for a financial advisor.


Yes, while most people avoid this scary topic of personal finance by delaying devoting any real efforts and attention to their own situation, avoiding calls and e-mails from those pesky little salespeople, I went out and actively called a few different firms around.

Now I know why people avoid these pesky little salespeople.

And that’s not just saying things, I not only work in this industry, but work for one of the bigger firms which I won’t name here. In efforts to not waste these advisors time, I simply wanted to get a feel for what they had to offer clients, what their value added was, and really explore whether ‘fee only’ firms were any better than those that do not charge a fee to use them as an advisor. This is what I discovered. Every advisor registered with a legitimate company gets paid by the investment companies for the assets they bring in and hold under management. This money comes out of the build in fee that every client pays: whether it is management expense ratios, transactions costs, etc. Above this, the advisor can additionally charge the client a ‘fee’ for managing your money. This fee is paid directly to the advisor. Yes, so now you are paying your advisor directly through a fee, and indirectly through the MER/Transaction Costs which is part of the product you pay into. This might be okay if you really like your advisor, however if not, you should be able to find an advisor to set you up with a plan where the advisor is not getting paid twice on the same product. I say you should, as that is how I set up all my clients, as to increase transparency, the client should be able to fire their advisor at any time if they are unsatisfied, and the advisor has no right to tie your money up in plans with high redemption costs or penalties for early redemption. If they did, it was  probably to get a better sales bonus, something which should set off a warning sign you are with the wrong advisor. I digress.

Back to my mystery shopping: I was a bit shocked to hear from the advisors, and their narrow focus. I dictated I was interested in a financial plan, however there was an overwhelming interest solely in wealth management (And not one of them actually asked me for an appointment!). One of the first questions asked was: How much do you have in assets? Yes, that is right, nothing on budgeting, cash flow management, savings, insurance, or debt. As unimpressed and disappointed as I was, I came to realize that everyone that is interested in budgeting, cash flow management, savings, insurance or debt probably does not have anywhere to turn to get set in the right direction, and will continue to aimlessly wonder if they are doing anything right in their personal financial situation. While most advisors seem to be focusing on the rich, the rest squander, hearing about the importance of financial literacy from the media, but not seeing this in practice when they actually show interest in applying some of these personal finance basics. Perhaps its the legacy of the presence of Occupy Toronto has me focusing on ‘the rest’, or maybe it’s the recognition that this generation has so much at our disposal that we can choose to pursue and set out to accomplish almost anything under the sun, and perhaps it is time we start focusing some attention on those that need the direction the most.



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