Be Careful, Financial Planners Are Salespeople Too

Published 8/22/07 (Modified 3/9/11)
By MoneyBlueBook

The wealthy seem to have all sorts of advisers and planners helping them manage their vast fortunes. But what about the rest of us regular folks who don't have the extra millions of dollars to throw at legions of planners, accountants, and managers? Some of us can rely on planners, but I think it's very important we all learn to educate ourselves about individual financial planning.

Financial Planners Are Also Salespeople

Recently I took a look at my mother's retirement and investment portfolio and was appalled at the funds she had invested in. Apparently, all of her investments were made at the advice of financial planners and account managers that recommended the products. The most glaring aspect was that many of the mutual funds she had put her hard earned money in were front loaded, with unjustifiably high expensive ratios, which meant her brokerage firm took a cut of her money immediately after it was invested in the particular fund and that it also regularly extracted a disproportionate percentage of her investment to cover fund expenses. Some financial adviser obviously profited from this setup and likely received a healthy commission for recommending it to her.

Although we often forget, your personal financial adviser also functions as a salesperson, oftentimes just trying to get his or her commission groove on. In this day and age, with the growth of no loaded funds and exchange traded funds (ETF's) that offer exceptionally low expense ratios, there is no reason why she should have invested in either a front or back loaded fund. That is why it's so important to be financial educated and informed. It's like getting your car repaired. If you know what the basic process and car components involved are, you'll be better informed about what the mechanic is doing or is failing to do to your car.