Scott Burns is a syndicated columnist who writes a column on financial affairs.  His article on “Beware pitfalls of financial ‘advisors’” which appeared in the Sunday November 29, 2015, business section (p B4) of The Eagle had information which should be of interest to all investors.  The column, which can be read in its entirety at www.theeagle.comin the 11/29/15 e-Edition, made some points which we think bear repeating.  We quote some of the below (all items in quotations are directly from this article): 

Mr. Burns was waiting for an international flight to Paris and engaged a couple, also waiting for the flight, in conversation.  The wife was a financial advisor who had won the trip (an 8 day Viking cruise, Paris to Normandy, airfare included) as a sales inventive from the company for which she works.  Mr. Burns wrote the following:

“The company she worked for also provided generous commissions, as most insurance companies do.  And every dime of that money eventually comes out of the savings on the people they counsel on making ‘good plans for retirement.’”

“According to the Bureau of Labor Statistics, there were some 443,400 people working as insurance sales agents in 2012, all of whom might like a trip to Paris enough to sell you the product that will get them there fast.”

“There 2014 Annual report from the financial Industry Regulatory Authority (FINRA) notes that it oversees 636,707 stock brokers.  They may also be influenced by sales incentives.”

“…saves face an army of more than 1 million people who call themselves ‘advisors’ but are primarily motivated by commissions, perks, and sales incentives.”

“Both groups operate under the vague ‘suitability’ principle-that they will sell investments that are ‘suitable’ for their clients.  And they have fought being required to act as fiduciaries year after year after year.  Why?… A fiduciary swears to act in the best interest of the client and to put the client’s interests before their own.”

“The number of Registered Investment Advisor firms-those regulated by the SEC to perform to a fiduciary standard-is about 11,000.”

“There are about 100 people who live by commissions and sales incentives for every person who has sworn to live to the fiduciary standard.  Those aren’t good odds.”

“The trouble is that both the brokerage and insurance industries have business models that require sticking the consumer with high costs.”

“And the Tart is about 2 percent-from your money.”

Paragon Financial Advisors is a Registered Investment Advisory (RIA) firm which operates under the fiduciary principle.  Please call us if you need assistance with your financial planning or investment management needs.  Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financial planning and investment management.

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