Do You Trust Your Financial Advisor?

[Sarahkka]

We are putting money away for LOs' education and for our retirement. You can't just stick it in a savings account because it won't even match the rate of inflation. So, we are doing our best to educate ourselves on investing it. We have been working with a financial advisor, who has helped us do things like work out how much insurance we need, how much to put away for retirement and education, and then selling us the products to do so.
The only thing is, the system is set up so that these advisors don't get paid outright. They get a commission off the products they sell you.
We recently wanted to invest in something other than mutual funds, because those have really high management fees in Canada. She pushed us really hard to reconsider, and her reasons were pretty lame. I know she gets a higher commission from the mutual funds than from the other products we wanted.
So I am now feeling a bit uneasy and wondering if we've been just pushed into whichever fund makes her the most money, rather than what is best for us.
I don't think she's a bad person, but the whole system is set up that way, and it makes me leery.

Anyone else facing this? And if so, what did you do?

 

[Tiff]

Is there anyway you can speak to someone else? I trust my financial advisor - mainly because its through the bank and I never felt pushed into doing something that she would rather me do.

If you don't mind me asking, what were the other stuff you wanted to invest in?

 

[codegirl]

Being leery isn't a bad thing. I believe that blind trust of anyone over your own money is part of what went so horribly wrong in the states.

I believe that you need to educate yourself and then do what is best for your family. If that means that you need more than one advisor so that you can invest different ways, or if you really feel that in your heart that she's not doing what is best for you then get a new advisor.

It's a bad system if they make different commission for different types of investments because it will encourage what you are feeling right now, that she might not be in this for the best of intentions.

 

[tasha41]

If you feel like you can't trust her in any way and if your husband agrees, I think it's time you start to look for someone else. Your money and future financial wellbeing deserve to be in trusted hands Even if you're not sure about the financial side, I would trust your instincts regarding peoples' personalities and motives.

 

[Try Rocking]

I couldn't agree more than what the others said, you should have someone who is looking out for your best interests and not hers. I'd definitely go with your gut.

 

[Sarahkka]

Thanks for all the feedback.
My concern is that this is the way the whole damn system is set up: commission-based. So we're not going to avoid the problem with someone else. They will have the same incentive to sell us what makes them the most money.
A second opinion never hurts, though. Husband is thinking that that might be the next step.
In answer to your question, Tiff - we want to invest in ETFs (Exchange Traded Funds). These are sort of the new hot thing because they don't try to beat the market, they try to match it and they use a computer to do so. The returns have been beating out mutual funds on the average, and do not have huge management fees attached.

I'm feeling pretty overwhelmed because the system is not set up to be easily accessed or understood by the average person. I consider myself to be a pretty intelligent person, but I get so thoroughly confused when I try to figure out the advantages of one fund over another and even the basic how our funds performed compared to the market. So I don't even feel like I can get a clear picture of how well she is working for us. This hard-earned cash is how we are going to give our kids an education and make sure that we aren't in the poor house when we retire. So obviously, I need to be protective of it.
Sigh.
Thanks for listening?

 

[Tiff]

My Mom is a WHIZ with stuff like this. Want me to ask her? She'd never try and push someone to something that she wouldn't recommend. Granted, she's not a Financial Advisory but I trust anything that she would suggest. If nothing else if she feels that its a good idea.

My uncle (her sister's hubby) was ultra high up in one of the major investment firms and the family has gotten quite a bit of info from him.

 

[kanga]

I saw an IFA the other day. He had 2 fee options - (1) pay him an upfront fee and no commission is added to any investments £1.5k or (2) commission gets added to investments

I guess we need to remember that advisers are doing a job and not providing a free service.

You could always get the advice from your IFA and then go elsewhere and ask to take out the policy on an execution only basis. This means you take the policy out and sign to say you havent received advice about it and so you dont pay the commission on your premium. The draw back is, if anything goes wrong you have no-one to complain to

All funds have a management fee, so you won't be able to get away from this. You can compare funds carefully though and fund providers, to see who has the lowest fees.

 

[Sarahkka]

I'm not expecting it to be free, but I do think the commission system is rife with conflict of interest.
And the management fees in Canada are quite high compared to many other markets (usually between 2-3%). What bothered me is that when I ask about a cheaper product that has an equal or better performance record for my money, she still pushes the ones that cost me more and make her more money. That's not being a financial advisor - that's being a mutual fund salesperson. Big difference in my books.
I think I'd rather go with someone who is fee-based and avoid that commission question.

Tiff - thanks for your offer. I'll be in touch!

 

[simonben1982]

I think financial planning advisor is necessary if you are thinking of investing your hard earned money in the stocks or mutual funds. I trust on my advisor as whenever something good show up in the market he informed me and guide me to invest in the specified stocks.

 

[AlwaysPraying]

I have money in different banks and have different advisors for this very reason. I had all my money tied up at the same bank and like you was given advice that served themselves very nicely. So I started spreading the wealth and spreading the commission. I know I'll get a little lower return because each investment is lower because it's divided but for me I have my money competing against itself so I feel it's always going inthe right direction.