How To Choose a "Real Financial Advisor"
How To Avoid "Self Defeating Investor Behavior"
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Investment Success
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The Behavior Gap
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How Your Brain Works Has a Huge Impact On Your Investment Success.
"I Won’t Get Fooled Again": Roger Daltrey of the WHO
Studies have shown that:
- Most Americans spend more time planning vacations than they do reviewing the status of their financial goals and evaluating prospective financial advisors.
- As consumers, we form a good or bad opinion of the person across the table from us within the first three minutes. It can be as quickly as 10 seconds.
- Primary factors consumer’s list as why they chose their financial advisor are “their appearance and verbal skills”. Bernie Madoff, Tom Petters and Denny Hecker all have this type of charisma. All three are in jail.
- Your investing behavior matters. It matters because making some of the classic behavioral mistakes has cost the average investor close to 7% per year—over half of his/her potential earnings.(1)
Don’t Let Advisor "Appearances" Fool You and Do your Homework
The "gut feeling" system works fine if you are sitting across from a doctor, lawyer or CPA but fails miserably if you are sitting across from a financial advisor. The reason why is simple: All these professions require lengthy schooling and rigorous exams before they are allowed to practice in their field. This is not that case with financial advisors.
The financial services industry has over 80 different titles and designations, all which can potentially lead the consumer into thinking that they are sitting across the table from someone with experience and credentials.
The simple truth is that most investors are not a match for Wall Street's billion dollar marketing machine with the continued ability to develop products that make them millions of dollars and can blow up on investors. You have the ability to reduce your chances of this fate.
You owe it to yourself and your family to go beyond the first impression and to delve deeply under the hood of the car, so that you end up with what you deserve: A real financial advisor who places your best interest ahead of their own. This will involve substantial work on your behalf. I know you are busy, we all are, but you must invest time to get this decision right. Here is how you do it:
- Read "Who Can Investors Trust." This will require about 1-2 hours. We have provided a number of pictures and graphs to help better explain the critical points laid out in this document.
- Review a completed "Fiduciary Advisor Questionnaire" by one of WFG’s Wealth Advocates. This shows you what a real financial advisor should look like.
- Ask any current or prospective advisors you are considering to complete a "Fiduciary Questionnaire" and sign the Fiduciary Oath. This will eliminate the majority of those that are asked to complete it and won't.
- Are you responsible for the 401(k) decisions at your company? Are you an employee who questions the “soundness” of your 401(k) plan? Read "Why 401(k) Plan Sponsors Are Getting Sued."
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Our Brains are Hardwired from the Stone Age for Greed and Fear
Don’t Let Your Emotions Wreak Havoc On Your Financial Wealth
Your investing behavior matters. It matters because making some of the classic behavioral mistakes has cost the average investor close to 7% per year - over half of his/her potential earnings(1).
- More important than how you invest
- More important than whom you invest with
- More important than what fees you pay
- More important than taxes
- More important than anything else is......
We have provided the following resources that are critical reading for all investors. These materials lay out in plain English, that if you can "tame your internal emotions beast" then you have made it past the single biggest hurdle of achieving financial success. All of these materials are authored by sources outside of WFG.
Group One - Read These First
" Behavior Gap Snapshot," Carl Richards
" Invest Like An Adult," Carl Richards
" A Manual For Scary Markets," Carl Richards
" Sleeping with the Enemy," John W. Pfenenger II
" The Irrational Lizard Brain," Terry Burnham
" Timeless Strategies for the Successful Investor," Davis Advisors
" The Wisdom of Great Investors," Insights from Some of History’s Greatest Investment Minds, Source: Davis Advisors
Group Two – Read These Next
" Why We Make Bad Decisions," Robert Huebscher
" Closing the Gap," Morningstar
"The Upside of Irrationality," Duke University
Group Three – Read Next
"The Contribution of Behavioral Finance to understanding Asset Pricing and Investment Choices," Bruno Solnik
Though this particular white paper may be considered a technical read and is too long for most, it covers very important topics such as "Regret Theory."
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 Investing is Not Enough |
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The Final Steps
Option A - Success Can Be Elusive
Put off this important investment of time and effort until later. Life is busy, work is busy, family commitments are huge and American Idol and Jay Leno are a nice break after a long day. The wake up call usually does come later, in the form of bewilderment and disappointment, having chosen the “wrong people," possibly shooting yourself in the foot by making emotional decisions and then having too few years to make up for the damage inflicted.
Option B – Do The Heavy Lifting Needed
Do the needed homework. Become a much better informed American, who understands how the financial services industry works and how the human brain works.
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 Outperform 99% of Your Neighbors |
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Choose Option B!
WFG is committed to keeping consumers informed and protecting their interests so that they have the ability to make sound decisions in the marketplace.
The information that you find on this section of our website is information that we believe needs to be brought to the attention of consumers to educate them on important issues in the financial industry.
Give us a call or email if you think we can help. There is no obligation.
(1) Source: Carl Richards, www.behaviorgap.com.
The Problem with Annuities
Annuities are complex investment products that are often sold with too much “sizzle” to investors. The problems with the majority of agent/broker sold annuities are extensive.
There are several types of Annuities. The list includes Variable, Equity Indexed, Pure Life, Joint and Last Survivor, Life with Refund Features, and Term Certain. Many people think the variation means that one is better than the other. They are wrong. Overall, most annuities are unsuitable for most investors. How they are pitched convinces too many investors otherwise.
The commissions brokers make on annuities are higher than most products they can sell. This incentive drives them to sell investors a product that may not be suitable for them.
Several years back, Dateline NBC devoted one of their
"To Catch a Predator" episodes to the lies and deceit that often accompany annuity sales. We have broken down this episode into bite size nuggets (about 5 minutes etc.) that you can watch one at a time.
If you watch the complete set of videos, there should be little doubt in your mind to steer clear of annuities!
"To Catch a Predator" – Deceptive Annuity Sales TV Special