Free Advice is Worth Every Penny.
A weathered sign hangs in our local mechanic’s garage:
We offer three kinds of service – GOOD, CHEAP, FAST. You can pick any two:
GOOD service CHEAP won’t be FAST
GOOD service FAST won’t be CHEAP
FAST service CHEAP won’t be GOOD
Apparently, when it comes to car repairs, you can’t have it all. You must make choices. Financial advice is no different. A good financial plan takes time – it won’t be fast.
Unfortunately, most financial companies are in the business of selling products – not advice. They hire salespeople, not necessarily financial experts. And those salespeople will give you fast service cheap – it won’t be good.
Their advice is free because it’s part of a hidden agenda – hidden fees – in every product they sell, every service they provide, and every action you take. You may pay trading fees, expense ratios, redemption fees, front loads, back loads, CDSC fees, 12b-1 fees, custodial fees, premium taxes, and investment management fees. There are more, but you get the idea. Do you know what these fees are? If you’re thinking of using a fee-based advisor, you should. They’re not going to disclose them, and you’re not going to see them. It’s up to you to understand the high cost of hidden agendas.
Hidden fees are only part of the problem. Sales reps are paid to do one thing – sell products – whether it’s in your best interest or not. That’s why some Wells Fargo employees broke every rule in the book to open fraudulent accounts, why Nick Leeson risked all of Barings Bank’s assets for his own benefit, and why Enron executives convinced Arthur Andersen – a Big Five accounting firm – to shred documents and falsify earnings. Incentives are always aligned for corporate benefits – not yours. Their actions are eventually uncovered, but at the expense of those whose money was entrusted to their decisions. As Trent Shelton said, “Real situations always expose fake people. Pay attention.”
For example, at our company, Wealth Analytics, we only get paid for the advice we give – not the products or services we recommend. To reach your financial goals, pay attention to hidden agendas. Pay attention to hidden fees. Most of all, pay attention when fast service is offered cheap.