During this part of the episode, one of them said something that I found very interesting. He said that there is no financial advisory model that can claim the “moral high ground” over any other kind of model. His point was that it is all about the heart of the advisor. If it were that simple, I’d just tell people to type “financial advisor near me” into their favorite search engine, and go with the first one they find that seems like a good person.
The perspective of the “no moral high ground” is an interesting perspective. Let’s see if it looks the same when attacking this question from the perspective of the customer, client, or consumer of financial advice.
Financial Advisor Near Me
Let’s start with the easy stuff.
There are really only a few things you want from any financial advisor. You want them to give good advice, be a trusted source of information, and provide these services at a reasonable price.
The difficulty in teaching people how to find all of this is that the target audience of many financial blogs are people who range from personal finance junkies (at best) to those who don’t know anything about personal finance (more common in the real world).
So, when personal finance bloggers write about this tough topic, the best tactic to take is to write these posts with the person who is most likely to get hurt from the financial industry – the person with a low financial literacy.
For this reason, the financial advisor who provides the best advice with the least conflict of interest at the most reasonable price wins out in the blogging world.
This isn’t a personal attack on other financial advisors. The fact is that most people looking for paid financial advice do not know enough about personal finance to be able to “fight fair” or find the right advisor.
Most people wouldn’t even know what a good advisor looked like if it was sitting across from them at the table. The opposite can also be said. Most people don’t recognize a bad advisor until it is too late, which brings me to my next point…
The Financial Industry Created This Beast
I don’t feel bad for financial advisors who feel attacked by the personal finance blogging community. Many of the blogs that exist in this space have very strong opinions about the financial industry for a reason. Many of us have experienced the depth and breadth of how bad the industry can be.
This isn’t callous. It isn’t mean. It’s simply the truth.
In fact, you don’t have to look very far into the first posts on this site to find that one of the biggest reasons that I started writing about finance for physicians is because I was screwed over by an insurance salesman. This idea hits close to home for me.
To this day, I can’t get personal disability insurance because an insurance agent in the financial industry was trying to earn a commission off of me. And he was a “good guy.”
I don’t want something like that happening to anyone else. Not even my worst enemy (if I had a “worst enemy”). If I am going to fall off one side of the fence, its on the side of keeping people safe.
Many financial advisors would argue that these “bad apples” are an exception to the rule. But that’s just not the case. I can recount dozens of stories of malignant advice given to people I know. In medicine, it is really common.
How bad does it get? Here are a few examples.
Examples of Malady in The Financial Industry
I know medical students who have been sold whole life insurance policies. (Something I don’t even recommend for attending physicians who can theoretically “afford it”).
There is also that group of friends I have who have who were placed into loaded funds. This usually occurs because of a commission that wouldn’t exist in the model I recommend.
Don’t tell me that these advisors don’t know that index funds outperform their actively managed counterparts more than 90% of the time. They know better. Yet, they still recommended the more expensive (and less successful) funds. Why? Because they make a commission for recommending these products.
What about the people who were sold unnecessary products (e.g. whole life insurance, annuities, long-term care insurance, etc) despite the fact that they were not maxing out their tax-advantaged retirement space? This is all too common for physicians.
All of these examples don’t even include the financial advisory firm that was introduced to me as a fourth year medical student as a trusted source of information. They were brought in for our Intern Bootcamp. Only a few years later, the owner was given a 9 year sentence in prison for fraud.
So, you’ll just have to excuse me for feeling like my readers are financial targets of the financial industry. It sure seems like more of a norm than an exception to many of us who created blogs because of these experiences.
Note: this may be unique to the physician community where we often have a high income and low financial literacy. I’d suspect that is not the case, though.
Gold Standard of Financial Advising
Combining the first two points (the potentially low financial literacy of our audiences and the bad history of the financial industry), it should come at no surprise that the blogging community recommends a certain kind of financial advisor.
Not everyone wants to become a Do-It-Yourself Investor. Some people need the help, and I want people to be able to find that help with the least chance of getting hurt (read: least conflict).
If I want my readers to have the best chance to locate a financial advisor with the least amount of conflict of interest, the best experience, and the most reasonable cost… doing that does not involve pretending that all financial advisory models are created equal. And it certainly doesn’t involve leaving it up to the reader to determine who the “good guys/girls” are in the industry.
I’ve shared it before, but it is worth sharing again. This is my definition of the gold-standard model for financial advising:
- Fee-Only (The “only” kind of advising you should use – i.e. they don’t make commission off of products)
- Fiduciary (ethically/legally bound to do what is best for you, the client)
- Flat-fee (i.e. avoids the AUM model, which can introduce additional conflicts of interest)
- Experience working with people like you (i.e. experience working with doctors for my readers)
Why is this the Gold Standard?
You can call it what you want, but the advisor who meets all four of the above criteria is the MOST likely to provide the least conflicted financial advice at a fair price. And their advice should be of equal quality. They should have the same level of training as any other financial advisor.
The only conflict of interest in this model is that they might be inclined to work more hours (if paid hourly). Otherwise, they are just trying to do a good job. For a fair price. And provide less conflict.
This is the reason that bloggers recommend certain advisors over others.
You might notice that these advisors are harder to find. That’s because their fair pricing makes it more difficult to earn decent money. Doing things the right way isn’t always easy.
It also explains why my recommended financial advising list will never be very long on this site. Making less money on my blog is fine by me if I am making sure the people I recommend are really worth your time. I’ve done the hard work checking them out so that you don’t have to.
There are good reasons to use a financial advisor. When you find yourself in need of one, let’s not pretend that all financial advisory models are made equal, though.
Our readers don’t (always) eat, sleep, and drink personal finance.
For this reason, it is our job to do the hard work of helping them figure out the right kind of advisor that offers the least conflict and the best chance of giving good advice at a fair price.
This is a contentious topic. If you disagree, let’s battle it out in the comments. I’m always happy to hear a differing opinion. Let’s just make it respectful, please. If you want to rail on me, you can write whatever you want on your own site, just like I do on mine. Let’s keep it civil.