Mark D. Goldstein, CFP®
Certified Financial Planner
NEW MEXICO OFFICE
Pueblo Plaza Executive Suites
1100 S. Main, Suite 10
Las Cruces, NM 88011
Intelligent Office Complex
7362 Remcon Circle
El Paso, TX 79912
3701 Algonquin, Suite 150
Rolling Meadows, IL 60008
(877) 442-0698 Toll-Free
"Guaranteed SAFE-Money Solutions for a Successful Retirement!"
All professions have conflicts of interest, and the financial planning business is definitely no exception.
Have you ever encountered one of those brokers or financial planners that try to constantly "churn" your investments? They continuously encourage you to buy-and-sell, while attributing all that trading activity to changes in the economy or changes in the companies you're invested in.
Bottom line. More trading generates more money for the broker... not you! And, because of the way they make their money, too many financial advisors are biased in favor of certain strategies that aren't always in the consumer's best interests.
Example. Say you've got a problem with too much accumulated consumer debt. Your advisor may never even know (or care!) because he's too focused on selling you an investment (perhaps something much more exciting, like cattle futures), even though paying off outstanding loans... such as credit card debt, auto loans, or even mortgage debt... is your best financial option.
Reality check. Most financial planners don't recommend that strategy because paying down debt depletes capital that could otherwise buy investments that generate commissions or management fees for them!
CAUTION. "Financial Planning" through Banks! A lot of the big banks have so-called "financial representatives" and "investment specialists" sitting around salivating and just waiting to pounce on unsuspecting "BIG-balance" bank customers.
In reality, these "financial professionals" are simply brokers who are out to sell investments that pay them and the bank hefty sales commissions.
Most bank customers have no clue that these bank employees are generating commissions and that those commissions are being siphoned out of their investment accounts. A lot of these customers also assume that their investments (like bank savings accounts) are FDIC-insured and can never lose value. WRONG!!!
What about the non-commission based financial planners that "manage" your money for an on-going fee?
Well, although this fee (typically 1% to 1.5% of your investment, annually) removes the incentive to "churn" your account to run up more and more commissions, their "service" is typically not worth the cost and is something you're unlikely to need.
The way I see it, an on-going fee percentage still creates a conflict of interest because the financial planner has a disincentive to recommend alternative (perhaps SAFER and more beneficial) financial strategies that reduce the asset pool that he "manages" for that on-going percentage. Alternative strategies like contributing to your employer's retirement plan (up to the maximum "match"), paying off debts (including your mortgage), investing in real estate or starting a small business... and other things that may make more sense for you.
Advisors that work on a percentage of "assets under management" basis are likely to be biased against such strategies, even if they're clearly in your best interest.
Avoiding conflicts of interest. Investing and other areas of personal finance should not be complicated. You don't need to be spending lots of money (or any money at all) on brokers and investment advisors
When you look in the mirror, you're looking at the guy or gal who truly has your best interests at heart... and the one who's your BEST financial advisor!