Financial Advisers Lose US Investors $17 Billion Annually

Personally I don’t trust that anyone will care as much as I do about my financial well-being, not even a paid financial adviser. I’ve only met with a financial adviser once in my life more than 16 years ago and I left the meeting underwhelmed and unimpressed. I concluded the adviser wasn’t any smarter than me so why should I give him money to do something I can do on my own? Time has proven me to be correct about my conclusion.

In a February 2015 report the Obama Administration’s Council of Economic Advisers estimated investors lose $17 billion dollars each year due to their financial adviser’s conflicts of interest. In other words, financial advisers push their clients into inferior financial products (e.g. low performing mutual funds) because the adviser gets a commission from the investment firm for doing so.

You would think that would be illegal, but of course it’s not because when it comes to Wall Street vs. the public the public loses 99% of the time. In April of 2017 the Department of Labor was scheduled to begin to phase in ‘The Fiduciary Rule’, a rule that was to require financial advisers to work in the best interest of their clients. Wall Street Lobbyists have continuously battled against the Fiduciary Rule and with the election of Trump the Rule is delayed until June 9, 2017. After June 9th the rule is still up for additional review by the DOL  and the SEC. You don’t have to be a fortune teller to conclude there is a high probability the Rule will be scuttled under Trump and a Republican Congress.

“The Fiduciary Rule requires financial advisers to work in the best interests of their clients”

This is not to say you can’t or shouldn’t use financial advisers. However you should be wise enough to ask your adviser if they get a commission on any of the products they offer you and investigate if they have been the subject of any disciplinary action for misconduct. Most importantly you must realize that your financial future is ultimately your responsibility and take some time to learn the basics of investing and finance.

There is nothing to stop you from arming yourself with information about your current investments and what other options are out there. In this internet era the world is at your fingertips, there is an abundance of free financial information and advice available in the form of video, magazines, books, podcasts, websites and blogs like this one. The more knowledgeable you become, the better the questions you can ask your financial adviser and the better research you can do on their answers. In the end you want to make sure your investments are not counted among the $17 billion lost annually due to poor and/or conflicted financial advice.

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