| "> | | | | financial advisors. |
| Financial experts are a key element in the mutual | | | | Financial advisors are an important layer of the mutual |
| fund industry. If they're expert and unbiased, they're | | | | fund industry. At the very top you have the mutual |
| worth every penny they earn. Unfortunately, the | | | | fund companies. Right up there with them, you have |
| mutual fund industry works against finding such a | | | | managed account companies like GoldmanSachs, the |
| person. Here's what to do. | | | | JP Morgan family and Fisher Investments; below that, |
| Conventional wisdom says that your broker should | | | | you have financial advisors. |
| have your best interest first in mind and should know | | | | A financial advisor is supposed to act as a fiduciary |
| more than you do. But when a financial advisor or | | | | to his or her clients. This is how Wikipedia defines a |
| broker's compensation is connected to which funds | | | | fiduciary: "A fiduciary is someone who has |
| pay the most fees, how could they be completely | | | | undertaken to act for and on behalf of another in a |
| objective? They can no longer be unbiased. They no | | | | particular matter and circumstance, which gives rise |
| longer put the client's interests first. This is systemic. | | | | to a relationship of trust and confidence. A fiduciary's |
| This hurts you as an investor. | | | | duty is the highest standard of care at either equity |
| It doesn't help that investors often hurt themselves | | | | or law. A fiduciary is expected to be extremely loyal |
| by having this childlike naiveté about how | | | | to the person to whom he owes the duty." |
| they work with financial people. The investor can | | | | This is key here: "He or she must not put their |
| have the trust of a child. I mean, the amount of trust | | | | personal interest before the duty to the client." |
| they have with this stranger called a financial advisor | | | | A true fiduciary must not profit by putting personal |
| is mind boggling. | | | | interest first. There is nothing wrong with financial |
| And the financial advisor has to talk good, look good, | | | | planners and fund companies making a profit. Of |
| look successful, be successful, form relationships | | | | course it's okay. But when they actually put their |
| easily, act like they have the client's best interest at | | | | personal interests first, that is a problem. When |
| heart. For the most part, that's what an investment | | | | financial advisors sell the financial product to their |
| advisor truly believes. It's part of what creates the | | | | clients that pays them the highest fees, that's not |
| bad performance. | | | | necessarily what is best for their client. |
| It doesn't get any better when the financial advisor is | | | | Now, I'm not saying every single financial advisor |
| embedded in the community. In fact, it's worse. The | | | | does this, but I do say it's a general rule. This is more |
| advisor is a friend to many people, but the things | | | | than a slight leaning of a financial advisor toward a |
| that lead to investment failure are still at work. We | | | | mutual fund company that pays them the highest |
| may like and trust this financial advisor, but they are | | | | rates; it's a downright preference. And that's the |
| still what they are: mostly biased and not objective. | | | | reason that some fund companies pay higher |
| Even as I talk pretty starkly about the mutual fund | | | | amounts to financial advisors than others. This works. |
| industry, you should know that you are part of it if | | | | It brings in business. These are investment |
| you are partaking of it and not getting educated. You | | | | companies, after all. Mutual fund companies expect a |
| are creating or providing some of the momentum. A | | | | return on their dollar, and they get it. |
| major key is to understand how the financial planners | | | | What this means is this: Most investors go to a |
| and brokers themselves operate. It's extremely | | | | financial advisor thinking that they're getting objective |
| interesting how they operate their business, which is | | | | advice. In fact, it's biased and not objective. This |
| not much different than how the fund families | | | | doesn't have to be. But you have to be prepared. |
| operate theirs. I'm talking here about financial | | | | Knowing just a few simple facts is all it takes. It is |
| planners, financial advisors, and investment brokers. | | | | possible to adopt simple strategies that enable you |
| For the sake of this article, let's refer to them all as | | | | to plan when you can retire. |