Your Stock Broker Doesn’t Love You

A good while back I took a wonderful training class on how your phycological makeup effects your financial and other life decisions in major ways. I loved what I learned and have applied it in many aspects of my life but one thing the instructor said has stuck with me all this time and I still repeat his words to my clients all the time. In talking about Financial Advisors he asked, “and he is doing all of this work for you because he loves you?” He was making the point that peoples motives are not always as well intentioned as we might think and that certain relationships are more adversarial than we may realize.

Unfortunately, this adversarial relationship is most dangerous when it is veiled or disguised so well that one party has been duped into thinking that this was never the case. One place this can happen is with your Financial Advisor. The truth is not all Financial Advisory relationships are set up the same way. The investment industry evolved so that different advisory relationships are governed by different sets of standards. The big problem is the average investor doesn’t know the difference and the Big Brokerages would love to keep it that way.

Some financial professionals called Registered Investment Advisors work for a fee and are governed by the SEC and must submit to the Fiduciary standard. The Fiduciary standard requires the advisor to always act in the client’s best interest. On the other hand, Stock Brokers are governed by FINRA and work for a commission and are held to a lesser measure called the Suitability standard and it merely asks that brokers sell investments they believe to be right for the client.

In regards to some new legislation that would require all financial professionals to adopt the Fiduciary Standard Barbra Roper the director of investor protection at the Consumer Federation of America had this to say, “The average investor would be appalled to see how hard some members of the financial industry are working to avoid acting in the best interests of their clients”.

With Regards to these Brokers operating under the lesser suitability standard Arthur Levitt, former chairman of the US Securities and Exchange Commission (SEC) has been quoted as calling Stock Brokers, “good people stuck in a bad system”. He is also quoted as saying that, “the system in which brokers operate is still geared toward volume selling, not giving objective advice”. Strong words from the former head of the SEC.

The point is not to say all Brokers are evil and out to get you, but when you are trying to decide what to do with your life savings you might want to make sure the person you are talking to works under a system that is designed to put your interest first and not the interests of the Brokerage they represent or even worse themselves. One way you can begin to determine this is BEFORE you invest any money find out if your advisor is a Fiduciary or are they a Broker? How? Ask before you invest. If they tell you they act as a Broker even part of the time, then you can easily determine what their true motivation is. PS. They don’t Love you!

Investment advisory services offered through Horter Investment Management, LLC, a SEC-Registered Investment Advisor. Horter Investment Management does not provide legal or tax advice. Investment Advisor Representatives of Horter Investment Management may only conduct business with residents of the states and jurisdictions in which they are properly registered or exempt from registration requirements. Insurance and annuity products are sold separately through ECA Marketing. Securities transactions for Horter Investment Management clients are placed through Trust Company of America, TD Ameritrade and Jefferson National Life Insurance Company

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