I love these hilarious comments from angry financial advisers

July 30th, 2007 - 23 Comments

The best part about Suze Orman’s new Yahoo Finance column, “What to look for in a financial adviser,” is the comments from angry financial advisors.

“Advisor’s [sic] need to make a living,” they whine. “Of course a broker is going to make a commission….they have to eat too,” says another commission-based apologist. And, in one particularly eloquent quote, a financial adviser explains what he thinks of Suze’s advice: “It’s madness!!!!!!”

My goal, whether or not I used a financial adviser (I don’t), is to make the highest returns with the least headache. I’m sorry, but my financial adviser’s income isn’t my concern — and it shouldn’t be yours, either. But try to make this case somewhere online and watch the commission-based financial advisers come out of the woodwork and begin whining about how they need to eat and how they can deliver better returns than index funds (despite many years of data showing this isn’t true). Perhaps it may be if you compare yourself to the average American who has no idea what investing means.

BUT THE PEOPLE READING THIS SITE ARE READING A PERSONAL-FINANCE BLOG. You’re all savvier than regular Americans, so please don’t fall for this BS of paying a commission-based adviser. Yes, they “need” to make commissions so they can deliver “higher” returns. Sure they do. Coincidentally, I also “need” three strippers and a Bentley with wood trim and built-in baskets of chips, salsa, and champagne, but that doesn’t mean I’m going to get it. Young people are savvier than you think. We know enough not to pay for results that, on average, won’t materialize.

See Suze’s column and the accompanying comments here.

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23 Comments

 

Comments

  1. Until my net worth hits +/- $1,000,000 I won’t be seeking out a financial advisor. And even once I hit that number (positively), I’m not so sure.

  2. If those financial advisors are so confident that they can do a good job, why don’t they charge commission as a percentage of the ROI on the assets? For example, if they manage 100K for me and they make me 15K in a year, I’ll give them a percentage of the proceeds, If they lose money, they won’t get a dime (or even better, they should pay me). That would take out any conflict of interest – the more they make for me, the more they make themselves.

  3. woody,

    because financial advisors are not fortune tellers. no on can really predict the market. if they could, all the good financial advisors would charge the way you’re suggesting — probably a huge percentage.

  4. Ramit,

    I would be interested to hear your thoughts on Suze’s advice in general. Future topic, maybe – she’s good, but I still question some of the ideas she pushes.

  5. >>>>>>why don’t they charge commission as a percentage of the ROI on the assets?

    Because it is illegal per SEC regulations. That is why the hedge funds industry wants not to have anything to do with the SEC because they can do whatever they want and get 20% of profits AND still charge 2% per year!!

    Full disclosure: I am a Fee Only independent financial plannner. I agree with most of Suze’s article. In general, her advice is decent for the majority of her audience. When the complexity goes up just a little bit she usually does not know how to handle it and falls back to her basic advice mantra. What kills me is when she tries to dispense advice to callers after talking to them for a minute or so…It’s impossible to give good advice to someone over the phone in a minute or so!! Anyway, she is a good show woman and that’s what most of these people on TV are, it’s entertainment. Personally, when I need to laugh I watch Jim Kramer go nuts or find myself in uncontrollable laughing binges after that Kirosaki Rich dad dude opens his mouth!

    What we do is not rocket science! It can be done if you have the time AND interest for this financial stuff. Most people these days just do not have the time to keep up with the ever changing financial info coming out and some people would rather go for root canals than to bother doing it themselves. And most people are too overconident and they do not have the discipline to stick with a plan and usually end up hurting themselves. What we do is really provide peace of mind, save clients a lot of time and help them avoid making BIG mistakes!

    Do you need a financial advisor? That is a personal decision and most people will not change (stop doing it themselves and look for an advisor) until they surpass their internal threshold of pain. Most people will always do it themselves! Could they at least improve their situation if they had an hour or two consulation with a good Fee Only financial advisor who charges by the hour? Most likely.

    I also have to admit that finding a financial advisor is a very dangerous endeavour. There are lots of slick salesmen out there masquerading as advisors and they can really hurt you, sometimes fatally. I am amazed of what I see in this business by other “colleagues”! So, do your homework and if you decide to find one, Suze’s advice is not bad at all to start with. Just don’t fall for her blantant sales pitches…I still remember a show she was suggesting LTC insurance and she was pitching one company who is sponsoring her, yikes!

    I naturally would never ever consider someone whose compensation is based on the product recommendations! Stick with Fee Only (Fee Based is NOT Fee Only) and inteview at least 3 of them.

    Hope this helps.

  6. Woody is 100% right. I don’t mind them charging a bigger percentage of the gains, especially if they are doing work I could do myself on the claim that if they do it they will get me a bigger return.

    Of course if they are doing clerical work for me, like opening accounts, monitoring, balancing, etc, then they need to be paid for their time just like anyone.

    I think most financial advisors 1) over-sell the complexity of basic money management, and 2) definitely do present custoemrs with a conflict of interest where they get paid by generating transactions rather than increasing your value.

  7. Woody,

    The SEC regulates the activities of advisers and they can only charge on a performance basis for accredited investors, which is limited to people with a net worth of 1.5 million and a regular income exceeding 200k per year.

    The value of an adviser varies and return on investment is one of many factors. Many people rest their head easier on the pillow during tumultuous markets knowing that someone is at the helm who has weathered a bear market or two. Others find that using an adviser increases their privacy or helps them to establish charitable and family goals with less personal conflict among family. In most cases I’ve seen, people who use an adviser do so because they have enough money to alleviate problems of scarcity but they place value on the services of someone who thinks strategically about finance, taxes and life planning.

    In other words, financial advising is less about increasing money and more about managing life goals with money as a tool.

  8. commission-only “financial advisor” = salesman pushing crap he knows nothing about in order to generate commission to go buy toys.

  9. Ramit,

    Amen. Many financial planners are just glorified salesmen.

    Best,

    James C. Hendrickson

  10. I used to write a blog about random things I do and one time I wrote about how I invest in mutual funds. And one of the things I listed is that I never, never buy a front- or end-load mutual fund. Well, months later I found out that a financial planner had linked to my post stating that it’s absurd to say that load funds should be avoided. I kept thinking, what financial planner would actually tell a client to buy a load fund when there are plenty of no-load funds that perform better?

  11. People can do much better on their own than with a financial planner. Financial planners don’t always have your best interest as their main priority.

  12. With a basic knowledge of how the markets works, some research into a couple stocks, and a level head, you could probably outperform these financial planners more often than not. Don’t waste the extra bucks with these guys… do you’re own homework!

  13. I had to comment on your “needs.” I laughed so hard when I read this:
    “I also “need” three strippers and a Bentley with wood trim and built-in baskets of chips, salsa, and champagne, but that doesn’t mean I’m going to get it.”

    It’s too true. I’m glad you get that this isn’t really a “need,” since most young graduates would look at it as an entitlement.

  14. There’s a great part of “The Millionaire Next Door” where it talks about a guy who was always getting calls from financial advisers because he subscribed to a bunch of financial magazines. Whenever they called he told them: “If I’m going to hire a financial adviser, I want someone who is going to get better returns on my money than I’m getting now. Fax me a copy of YOUR OWN tax returns for the past several years. If your money, which you will obviously manage the best you know how, is earning a higher return than mine currently is, I will hire you.” Not one of them ever pursued his offer.

  15. Don’t suppose you’d be able to do any more UK or even euro-centric posts could you? You used to be very national-generic but its becoming more US-centric these days.

    I know you’re probably an American but I’m sure there’s a lot you could post about that’d cover everyone?

    Keep up the good work.

  16. If financial advisers want to eat, then they can charge a flat fee. None of this commission crap.

  17. I like most of the comments on here, well thought out. The only problem with fee only financial planners is that they usually require a minimum amount to work with them, which is an amount that most people don’t have. I just hate how everyone is so narrow minded about financial advising, not everyone needs a financial advisor. Most people should do it on their own, because they dont’ have that much money to deal with. The problem is the same problem with obesity in America. People aren’t disciplined to do it themselves. So it’s just like someone hiring a dietician, someone to coach them to be there and to be disciplined about it. Of course we’re on a financial blog so most of us think we don’t need a financial advisor. Obviously since we’re on here we are already interested in our finances, a lot of people could care less and just want to have that comfort that someone is looking out after their money, because it wouldn’t be them. America had an average savings of -.4% last year…..America is in debt up to their eyeballs.

  18. I thought you’d get a kick out of my recent Suze blog:

    http://www.mortgageloan.com/blog/harried-housewife/suze-with-a-z/#more-9

    Suze’s bottom line message in the financial advisor column you reference is the right one: Take responsibility for your money and don’t depend on others.

  19. I like Suze’s message that it’s up to us to take responsibility for our money, too. I’d like to hear your opinion on some of the specific advice she gives, Ramit.

  20. Somehow, financial advisers appear to be reduced to equity investement decisions on this and many other forums. I wonder, shouldn’t a financial advisor (or planner, for that matter) also take care of such issues as retirement planning, proper tax models, college savings planning, estate planning, etc.?
    Of course, while we belong to the below 35 and no kids demographic, we tend to go after the “quick” money that can be made with equities. For that I really don’t need an adviser. But there’s so much more than that to personal finance. Can we trust financial planners for those other issues?

  21. It seems like paying people to buy stuff for you, based on the number of things they buy (unless they only buy what you want, which is counter-intuitive with financial advisors) is like writing a blank check. Here, take my money! I’m sure many are quite ethical, but I’d certainly feel safer with a flat fee. Or a simple index fund.

  22. Not everyone needs an advisor. Those with multiple accounts, special tax situation, etc…yes. The average Joe, not so much. If you truly are deficient in anything investing oriented, but have limited assets, you can do a couple things starting from the most expensive on to the least expensive. 1) Hire and advisor just to do a financial plan. Some will do this for as little as a few hundred dollars. other will charge thousands….not recommended. An advisor will essentially interview you and then develop recommendations which you then can take and act upon yourself. 2) Use someone like Scott Trade. They have very low fees and for that low fee they also have access to advisors. 3) Lastly, open an E-Trade account and buy an asset allocation or balanced fund. Morningstar.com is free and they make recommendations on funds in every category. Look for a no-load fund (meaning you don’t have to pay them an upfront fee for the privilege of buying their fund).

    Of course you could always stay tuned here for more great insight from Ramit.

  23. In this generation, people tend to be looking for the fast cash, and not necessarily looking for long term investing. In this situation there is really no need for an advisor and if you should choose to use an advisor, I would want a flat fee. This is defiantly a down fall in our economy. There are too many people looking for the easy way out and I think the younger generation is not up to speed on how important retirement really is because they think they will get their hands on the fast money. This could really hurt the jobs of advisors in the future or they may need to charge a commission.