Scott Burns is a syndicated columnist who writes a column
on financial affairs. His article on
“Beware pitfalls of financial ‘advisors’” which appeared in the Sunday November
29, 2015, business section (p B4) of The Eagle had information which should be
of interest to all investors. The
column, which can be read in its entirety at www.theeagle.com
in the 11/29/15 e-Edition, made some points which we think bear repeating. We quote some of the below (all items in quotations
are directly from this article):
Mr.
Burns was waiting for an international flight to Paris and engaged a couple,
also waiting for the flight, in conversation.
The wife was a financial advisor who had won the trip (an 8 day Viking
cruise, Paris to Normandy, airfare included) as a sales inventive from the
company for which she works. Mr. Burns
wrote the following:
“The company she worked for also provided generous
commissions, as most insurance companies do.
And every dime of that money eventually comes out of the savings on the
people they counsel on making ‘good plans for retirement.’”
“According to the Bureau of Labor Statistics, there were
some 443,400 people working as insurance sales agents in 2012, all of whom
might like a trip to Paris enough to sell you the product that will get them
there fast.”
“There 2014 Annual report from the financial Industry
Regulatory Authority (FINRA) notes that it oversees 636,707 stock brokers. They may also be influenced by sales
incentives.”
“…saves face an army of more than 1 million people who
call themselves ‘advisors’ but are primarily motivated by commissions, perks,
and sales incentives.”
“Both groups operate under the vague ‘suitability’
principle-that they will sell investments that are ‘suitable’ for their
clients. And they have fought being
required to act as fiduciaries year after year after year. Why?... A fiduciary swears to act in the best
interest of the client and to put the client’s interests before their own.”
“The number of Registered Investment Advisor firms-those
regulated by the SEC to perform to a fiduciary standard-is about 11,000.”
“There are about 100 people who live by commissions and
sales incentives for every person who has sworn to live to the fiduciary
standard. Those aren’t good odds.”
“The trouble is that both the brokerage and insurance
industries have business models that require sticking the consumer with high
costs.”
“And the Tart is about 2 percent-from your money.”
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(RIA) firm which operates under the fiduciary principle. Please call us if you need assistance with
your financial planning or investment management needs. Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financial planning and investment management.
