When most people think of the profession of Financial Advising, they generally think of one thing: salespeople. They think of a person or company who is trying to get them to buy insurance, invest money in certain funds that pay high commissions, or otherwise actively manage their money for which the manager receives a percentage of the total assets under management as a fee. They think of the industry as being an unnecessary use of money, run by individuals who are only out to line their own pockets. Unfortunately, this is true in many instances, but it is not always the case.
Like any industry or profession, there are good and bad people. Not all doctors charge for services while only giving patients a placebo rather than actual medication. Not all contractors will take a deposit, start the job then disappear. Not all mechanics will tell you that you need unnecessary repairs because they think you you do not know any better and will believe them. The same holds true for financial advisors, and in fact, some financial advisors do not sell anything at all other than services and results!
Many financial advising firms do not deal in the sales of any products whatsoever. No insurance, no annuities, no funds, no investment products of any kind. Many are started for the express purpose of helping people reach a particular goal or educating people on how to better handle their finances. It is not always about sales and commissions, but rather transferring knowledge and building relationships based on trust.
What’s more, it is important to realize the impact true, independent financial advisors may have had on the housing crash. Had many of the would-be homeowners consulted with a financial advisor, or financial planner, they may have had a better idea as to what lay ahead in terms of hidden costs of maintaining a home, real estate taxes, and even what to expect if there was an adjustable rate mortgage (ARM) involved. The advisor may have been able to create projections for varying scenarios to give the client a better idea of what the mortgage cost would be once the rate adjusted.
With regard to debt-management, a financial advisor can provide a more objective plan, especially when one considers all of the shady debt-resolution companies laying in wait to take advantage of unsuspecting and emotional consumers. Independent financial advisors work with clients to get their liabilities in order and formulate a plan to pay down that debt. They also can teach clients how to develop a budget, and to compensate for changes in economic conditions, whether personal or nationwide.
More than anything a financial advisor can act as a confidant, particularly when the topic of money is either a taboo one in their family, or they are just too ashamed to talk to their friends and/or relatives about their troubles. Many do not charge for an initial consultation, and some (like my own company GreenBridge Advisors) do not charge for simple conversations to ease their clients’ minds or to explain something they might not be too familiar with or understand.
No matter what you may hear about a particular person or company within an industry, it is important to realize that one person/company/incident does not represent an entire industry. Just because some people do not feel the need to seek paid, independent financial advice, that does not mean that all people do not need it. After all, it may just save you from financial disaster.
Have you or anyone you know fallen prey to any bad seeds? Did it change your opinion of the industry in general, or just of that particular person or firm?