This seems like it was a situation where the incentives for the financial advisors were somewhat misaligned with the best interests of their clients. It reminds me of the chapter on realtors in the book Freakonomics. The realtors are getting a commission on the sale of your house so they seem like they have your best interests at heart, when in reality it is actually better for them to sell your house quickly on a bad deal and move on to the next house. In this case the advisors can make a ton of money on certain assets, which won't actually yield the best, most stable results for their clients.
Fiduciary responsibility has always been under-regulated. The average person is not educated well enough on the subject to make their own decisions concerning their financial future, however, just because financial advisors are educated, doesn't mean they are working for YOUR best interest. Flat rate fees are misleading because there really isn't any guaranteed results, whereas hidden fees seem to pop up out of nowhere unbeknownst to clients. I like the idea of higher standards, but I'm unsure where they should come from. CFPs go through a lot of exams, but it does not mean that they are using their knowledge effectively.
This seems like it was a situation where the incentives for the financial advisors were somewhat misaligned with the best interests of their clients. It reminds me of the chapter on realtors in the book Freakonomics. The realtors are getting a commission on the sale of your house so they seem like they have your best interests at heart, when in reality it is actually better for them to sell your house quickly on a bad deal and move on to the next house. In this case the advisors can make a ton of money on certain assets, which won't actually yield the best, most stable results for their clients.
ReplyDeleteFiduciary responsibility has always been under-regulated. The average person is not educated well enough on the subject to make their own decisions concerning their financial future, however, just because financial advisors are educated, doesn't mean they are working for YOUR best interest. Flat rate fees are misleading because there really isn't any guaranteed results, whereas hidden fees seem to pop up out of nowhere unbeknownst to clients. I like the idea of higher standards, but I'm unsure where they should come from. CFPs go through a lot of exams, but it does not mean that they are using their knowledge effectively.
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