Expensive Suits, Fancy Offices, but can you trust Financial Advisors with your investment pot?
If you are anything like I was 15 years ago, you would believe that the financial industry is geared up to make you money and is focused on your success.
Read the 5 biggest myths about who you can trust with your retirement fund.
Myth 1: Believing the Financial Advisors Have Your Best Interests At Heart
Over the last 50 years, we have been indoctrinated to hold professional people in high esteem, a job in banking was respected and working as a Financial Investment Adviser meant you understood how to invest money on behalf of your clients. But since 2008’s financial crisis we have seen this stripped away to reveal the truth; they are only human and humans have flaws, plenty of them!
Bankers once renowned and respected for being conservative with other people’s money were no longer conservative. They nearly lost it all. Cash in the bank was supposed to be a safe haven, yet it had been completely risked.
Searching for ever-increasing profits they took risks with our money and never told us.
Investing it in funds and derivatives they knew little about, such as murky Mortgage Backed Securities & Collateralized Debt Obligations. so they could increase their own profit margins and secure bigger bonuses.
Myth 2: Believing Banks Are Prioritizing Economic Growth Through Lending
Now they are too conservative, being too scared to lend money to the very businesses that keep our whole economy going. All this whilst having their profits bolstered by an extremely low cost of money (Fed Funds Rate, Bank of England base rate).
They are getting the money at practically no cost while lending it out at still pre-crisis rates. You try getting a loan under 3%. All this while they are continuing to pay themselves big bonuses again.
Myth 3: Believing Financial Advisors Understand Risk
Financial advisers who talk about risk management squarely do not understand risk.
Just before the Financial Crisis struck, record numbers of Newsletter writers, Hot Stock Tipsters, TV Pundits were all still bullish.
Even when the crisis struck, if you had called your adviser he would have told you to “stay with your funds”, “do not do anything”, or if you really insisted you wanted to move to safety it is then you find out that you cannot as you are stuck in a fund for a “minimum period” and if you moved out there would be a “penalty”.
How is that managing risk? Managing risk also should mean you have the ability to move funds quickly with no cost to avoid demolition to your retirement fund.
This exactly happened to my father, he was injured in a horrific workplace accident and had to retire handicapped early. He received a small award from the courts to compensate him for the pain (just enough to live on). I took him to see the most respected Financial Advisers in his area. With their fancy offices and rows of Audi’s in the car park, my father was quickly convinced these people would conservatively invest his money, to enable him to live out the rest of his life with fewer money worries. He needed to focus on assisting my mother who also has health issues.
BOOM financial crisis.
50% of his original investment has vanished. He could not get out of the contracts and now he needs to hope the markets recover to pre-crisis levels before he even sees the amount he invested. This could be 3 to 5 years if he is lucky. In the meantime, he is drawing down this reduced amount just to cover his living expenses, this money he will never get back.
Myth 4: Financial Advisors Know How the Stock Markets Work
My point here is simple.
Financial advisers in general are experts in selling you funds, pensions and insurance they are not experts at understanding what way the market is heading and if those funds will make you any money at all.
However, they are also experts in taking a fixed percentage of your money every year whether you make a profit or not.
So to them, the main focus is on how much of your money they can invest in a 3rd party fund so they receive a percentage of the value of that portfolio every year.
They are measured in terms of Value of Funds Under Management & Increasing their own profits.
You will never see a marketing campaign suggesting they will make you money or will beat the market because mostly, they cannot.
Myth 5: Investing Is Too Complicated For Me To Understand
Now is the time to take control, you are probably visiting this site because you want to:
- Take control of your investments.
- Understand how the markets work
- Make the decisions.
This Liberated Stock Trader is dedicated to teaching investment and trading principles that can be applied to Mutual Funds, ETF, Stock Market Tracker Funds and investments in general.
Wouldn’t you like to know how to evaluate whether the ETF or Mutual Fund your adviser is recommending has any chance of making money in the near to medium future?
Who can you ultimately trust with your finances?
You and only you.
Further Reading – Learn Stock Market Investing