Avoiding the low-class financial advisors

How do you know you’re working with a low-class jackss financial planner?

I’ll tell you: when he won’t eat his (or her) own cooking. And, there’s a lot of that floating around out there:

  • They don’t buy the type of life insurance they sell you (and don’t really believe in it).
  • They don’t invest in the stocks they sell you (but they believe their broker dealer or wirehouse’s recommendations).
  • They don’t invest in the mutual funds they sell you (and instead make most of their money selling you books on how to invest in said mutual funds).
  • They don’t use the budgeting app they sell you on (but they make money selling it to you).
  • They don’t save as much money as they tell you to save (and in fact they probably have an exit strategy which involves a one-time sale of their business for a huge lump sum of money, which will leave you holding the bag on their recommendations).

But that’s not all. They also do a bunch of other stoopid things, like:

  • They report your portfolio earnings as time-weighted returns instead of money-weighted returns (the former tells you how well your advisor did, while the latter tells you how well you did in your advisor’s recommendation); or,
  • They give you very vague reporting (or no reporting at all); or,
  • They give you short, one-word, answers (or no answers at all) to your questions; or,
  • They don’t equalize cash flows or time periods when doing comparisons between two different financial products or strategies (usually, this happens when comparing insurance against an investment, a 15 year mortgage against a 30 year mortgage, and leasing a vehicle vs a bank loan, vs paying cash).


They don’t charge you the same fees they’d charge themselves in the same situation.

Here’s what I mean:

I was reading an article on Forbes by a very well-known financial planner, who was blasting another financial planner (also well-known) because this guy charged “excessive fees” to clients for managing their money. We’re talking a 1%-1.5% fee on managed assets. That’s $10 for every $1,000. On a million dollar portfolio, that’s $10,000 per year, every year…


What I find hilarious is that the author owns a financial services firm where he himself charges a fee that’s higher than the advisor he was blasting in the article.

How do I know this?

Why, I scrolled to the bottom of the article, and clicked through the link in the author’s signature on Forbes, and went straight to his firm’s webzone, and then… I scrolled to the bottom of his webzone,

Any guesses as to what he charges?

At the time I did this, his minimum fee was between 1-1.5%, with a minimum fee of almost $4,000 per quarter on large portfolios. For those keeping score in the audience, that means he’s charging about $16,000 per year — $6,000 more than the advisor he was blasting — for the same size portfolio.


Oh, but it gets better. In the Forbes article, he boasts about charging clients a fee of just 0.25%.

Now… he does charge a lower rate for smaller portfolios, but in the article he was raising a stink about the fees charged on large portfolios, not small ones.

Now, don’t get me wrong. I’m not against making money. The only reason I point out the hypocrisy is because it is hypocrisy. But… there is something else that is even more troubling than hypocrisy. It’s not so much what the fee is, but how the fee is charged. See, I don’t care if someone charges me a lot of money for something. But, when I’m paying for a service, I want results of the service. I’m not paying for time. I can pay a bum on the street corner for time. I want results, baby.

But such is the way of the financial industry these days. Advisors want to make money regardless of whether their clients make money. So, they charge fees that are independent of results.

That way, they’re not held accountable for their recommendations (not really). I mean, to some extent they are because if they lose all the client’s money, they lose all that income. But, those tiered investment management fees (which is how practically all financial planners make money these days) means the advisor can set their annual fee levels at specific portfolio thresholds. Meaning, if you have $1,000,000 and you lose $250,000, the advisor can charge you a 0.75% annual fee for a $1 million portfolio ($7,500), but raise the fee to a 1% annual fee for managing $750,000 ($7,500) so his income is unaffected by your losses.

Of course not everyone out there is lying. and not everyone is a low-class jackass.

But, I will say this: do not take anyone’s word for it.

Not even mine.

Verify everything.

Make them demonstrate that they know what they’re doing, that they have skin in the game, that the advice they’re giving you is “as advertised,” and that they aren’t constantly running around saying one thing and then doing another.

And more importantly, that their success is, in one way or another, directly tied to your success.

This includes me.

Wait. What? You want me to demo my claims?

Ok sweetheart, hit the jump and get on my email list, and I’ll show you exactly how all this works for me and for all my clients.

David Lewis, AKA The Rogue Agent, has been a life insurance agent since 2004, and has worked with some of the oldest and most respected mutual life insurance companies in the U.S. during that time. To learn more about him and his business, go here.