Posted By: CFP&WM On: Jul 27th, 2009 In: Financial planning General info My soap box

Consumers would benefit if we call “A Spade a Spade”

76% of those surveyed did not know the difference between a sales representative of a Broker Dealer and that of a Registered Investment Advisor. The reason is the term “financial advisor’ is often utilized by stockbrokers, insurance agents and others who are looking to sell you a product.

A “broker dealer representative” is a salesman of stocks, bonds and mutual funds. Many times they also are also involved with the sale of insurance and their parent company can also provide mortgages (all for commissions). “Insurance agents” represents the interests of one or more insurance companies and only get paid when they sell you a policy. They too are salesmen not advisors.

Neither the BD rep or the insurance salesman get paid to give you advice, hence they are not “advisors”. They get paid when they sell a product hence they are salesman, So to decrease the public confusion lets call them salesmen and not advisors!

People are confused when salesman and their companies use the terms “financial counselor”, “financial consultant” or” financial adviser”. In the vast majority of cases there is no advice at all, only an attempted to generate a commission for the salesman and his or her company.

We do not have “Used Car Advisors”, “Carpet Counselors” or “Door-to-Door Consultants”. These are all salesmen and the public can recognize them as such. But when salesmen (insurance companies, in the banks and at other large financial institutions) are called “advisors”, the public gets confused.

There are true financial advisors but most people do not know of them. Fee-only Registered Investment Advisors do not sell product. They work for the client and are paid by the client for the advice. This is a true form of a “financial advisor”.

The only true “ financial advisors” are registered with the proper governmental agency as a Registered Investment Advisor (RIA) and are situated to provide objective advice with out a conflict of interest.

If the government wanted to decrease financial sales abuse, it should require those selling product to use the label “salesperson” not prevent the use of the title “advisor”!

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