This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Wednesday, December 3, 2008

Article: Beware of free financial advice.

Posted By Paul

Great article today on some of the things to watch out for when considering financial planners.

First some excerpts that I found interesting:

"Your bank may be very good and you may even play golf with your banker. Make no mistake that a bank is also in business to make money. So if your bank is giving investment advice, you can be pretty sure there is something in it for them. They may not charge you by the hour but they are making money nonetheless." -and- "What I consider to be abuses fall under two categories:

First, there are the expensive mutual funds with front-end or back-end loads. These pay handsome commissions to the banks and, of course, have a great track record of under performing no-load mutual funds.

Second, there are the ever-popular permanent insurance policies that come in flavors such as whole life, variable annuities and universal life. These are even bigger cash cows to the banks that partner to sell them."

Here is the full article:
Beware of free financial advice

To add a little advice of my own:

I have heard people say that their financial planners are great, and best of all, they work for free. This reminds me of an earlier post:

Know Their Agenda: Some great advice I got.

The short version: OF COURSE they aren't working for free, the question is HOW are they getting paid.

I think that the most common way that financial advisers make their money is by recommending funds that have loads and fees associated with them.

What bothers me is that it is SO easy to check mutual funds to see if their fees are excessive or not.

I don't think there's anything wrong with having an adviser, knowing that you are paying them through mutual fund fees, and being okay with that. I just worry that people out there think that somehow the adviser really is working for free.

If you have an adviser that you think is working "for free" then you might want to take a look at the following articles:

A Few Quick Tips On Mutual Funds

What are you really paying for advice?

Paying an adviser doesn't mean you are getting swindled, but paying an adviser AND NOT KNOWING IT seems like a bad idea all around.

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