Due diligence…recommended whenever you one is contemplating a barter or cash deal. Shouldn’t the same action be taken when working with a financial advisor? Read the following missive…it will only take a minute but it could be very helpful, and make a difference in your financial future.

The Dow Jones
Industrial Average is down 2,000 points from its historical
high of more than 14,000. Declines of this magnitude are
bear markets if the losses last more than six months. A
recent Paladin Registry survey shows bear markets cause the
number of consumers who fire financial advisors to triple.

Jack Waymire, co-founder of the Paladin Registry
and author of the book “Who’s Watching Your Money?” (ISBN
0471476994, John Wiley & Sons, 2003), said, “Consumers have
always given financial advisors too much credit for results
in bull markets and too much blame for losses in bear
markets.

The big jump in advisor terminations is consumers’
emotional reaction to the losses, but it may or may not fix
their problem. It depends on who they hire to replace the
fired financial advisors.”

Financial advisors who promise high performance deserve to
be fired. That’s because promises like “I can produce
exceptional returns for your assets” are sales gimmicks and
not guarantees.

Financial advisors can’t guarantee results
because they can’t accurately predict future stock market
performance. However, this regulation doesn’t stop
aggressive, lower quality financial advisors from using the
“hot product” sales tactic.

Waymire observed, “This deceptive sales tactic has three
purposes. First, products with hot track records appeal to
consumer need for higher returns.

Second, less ethical
advisors use hot products to establish themselves as
investment experts. They tell consumers their unique
expertise enabled them to identify hot products before the
performance occurred.

And third, many financial advisors
adopt the track records of the hot products as their own.
For example, the products averaged 20% per year for three
years, so advisors say they averaged 20%.”

The problem is their claims aren’t true. But, these are safe
claims for financial advisors. They know consumers have no
way of validating the claims, for example when they started
recommending a particular product to clients. Claims are
also part of sales pitches so there is no written record of
what was said to consumers. Verbal information is easy for
financial advisors to deny later.

Consumers who are sold high expectations in bull and bear
markets should fire the financial advisors who convinced
them their expectations were real. Bear markets do consumers
a considerable favor when they expose the deceptive nature
of these financial advisors’ sales pitches.

Consumers’ next
step is to make sure they select quality advisors after a
careful review of their credentials, ethics, business
practices and financial services. Once burned, they should
know enough to avoid self-proclaimed experts who sell hot
products.

About Paladin Registry

Founded in 2003, Paladin is an information services company
that provides free public services to consumers who use the
services of financial advisors and financial planners. The
Registry educates consumers about financial professionals
and provides ratings and documentation for criteria that
impact their competence and ethics. You can learn more about
Registry services by going to:
REGISTRY

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This entry was posted on Thursday, March 13th, 2008 at 7:49 am and is filed under Top Resources. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.