The lies your financial advisor tells you (and how to spot them)

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When it comes to getting advice — especially financial advice — truth can be such a relative thing.

If you’re an individual investor, you probably know exactly what I mean. And the federal government isn’t exactly helping. The Trump administration recently gave the green light to kill a fiduciary rule that would have required commission-based brokers and insurance agents to disclose conflicts of interest and compelled them to recommend the lowest-cost retirement plans to clients. Those rules were set to be phased in this spring, but now they may be tossed into the recycler.

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Bad timing. The latest Certified Financial Planner Board of Standards survey suggests 60 percent of investors feel advisors put their companies’ interests first, while only 12 percent think they put the clients’ interests first. And 63 percent believe the current laws don’t protect consumers from those who would take advantage of them.

Or, to put it less delicately, a lot of financial advisors lie. But how?

No fees!
“When an advisor says there is no commission involved you should be leery,” says Brent Wilsey, who runs the San Diego-based Wilsey Asset Management. “As much as you may hope, most likely they are not going to do their job for free.” Instead, companies build a façade that makes it look like your investment is fee-free. “But in reality, they hide the fees by burying them deep into documents,” he adds. In other words: There’s no such thing as “free.”

Trust me, I have a title
“That is perhaps the biggest lie,” says Warren Ward, a Columbus, Ind.-based financial advisor. There’s so much title confusion in the industry, and it’s a confusion that unscrupulous advisors often take advantage of. “They are apparently free to call themselves pretty much anything: advisor, counselor, wealth manager,” he adds. Ward is a Certified Financial Planner, a significant designation requiring the completion of multiple college courses and passing a two-day exam, but the law allows his less studied colleagues to call themselves anything. And, in an industry that’s already confusing, that’s enough to fool some investors.

Look at these returns!
Funny math is common among some financial advisers. Some advisers overstate compound interest, for example. “It’s a prevalent, egregious lie that never gets challenged,” says Jordan Wolff, the chief savings officer for Shrinkabill Services, a financial services firm. The equation is something like this: “If you invest $A over the course of B years you will earn $C because the average rate of return of this fund (or market) is D%” But wait. “The problem with this equation is that no one can score that rate of return every year,” says Wolff. The math treats this as a consistent earning every year. And that’s not accurate.

Did we forget to mention that?
Few advisors will tell you an outright lie, says Kevin O’Brien, president of Peak Financial Services. “Lies of omission are probably more common,” he adds. How so? Many terms and fees are buried in difficult-to-read prospectuses, and you may not be able to decipher the true costs of some investments. “Because of this non-transparency, advisors may not be forthcoming, unless clients specifically ask about the costs and how the investment is priced out,” he adds. Remember, Registered Investment Advisors and Investment Advisor Representatives are required to act in a fiduciary role, while Registered Representatives may earn a commission.

This investment has no risk.
There’s no such thing as no risk, says financial advisor Ilene Davis. “While a bond or CD may guarantee return of principal, purchasing power loss is a risk not often discussed,” she says. It’s OK to refer to such investments as “low-risk,” but to call them “no-risk” investments is a lie. If your advisor is telling you otherwise, you might want to look elsewhere.

It’s do or die
Shady investment advisors love fear tactics. “If you don’t act now, the situation will change and you won’t succeed,” says Carol Fabbri, the managing partner of Fair Advisors, an independent financial advisory firm. “Your kids won’t go to college. You’ll eat cat food.” Planning is not a drama or a reality television show, she says. It takes patience to succeed. Bad advisors push clients to make a decision because they are afraid of losing a sale, not because the market is going to change. If your advisor is scaring you, maybe you have the wrong advisor.

How to avoid this? By choosing the right advisor in the first place, says James Pollard, a marketing consultant for the website

“Interview multiple financial advisors,” he says. “It’s important to do this rather than just pick one, especially since some advisors might not mesh well with your goals or personality. Interviewing several financial advisors will give you a better perspective on the right fit for you.”

Also, pay attention to how your financial advisor discusses and approaches risk. The best and most trustworthy financial advisors tend to be completely open about risk. If someone downplays risks, run for the hills.

Finally, do a background check on your advisor. A financial advisor’s Form ADV, the form used by an investment advisor to register with both the Securities and Exchange Commission and state securities authorities, will let you know of any problems. If you see anything suspicious, move on.

The federal government’s latest actions may have given financial advisors a right to lie, but now you know how to prevent that from happening.

5 thoughts on “The lies your financial advisor tells you (and how to spot them)

  1. In America, the best way to tell if a financial advisor is lying is to watch their lips. If the lips are moving, it is a lie.

  2. The financial adviser industry is FULL of bogus certifications/licenses. So many of these so-called licenses simply add the word “certified” or “accredited” and people think they are legitimate, while nothing could be further from the truth. There’s the “Certified Senior Adviser” and “Certified Senior Retirement Specialist” which are nothing but titles created by for-profit companies that award them after somebody has paid for a two-day seminar and passed an exam that a 3rd grader could pass. They end up pushing useless annuity-type investments. The only financial adviser titles I would ever trust are Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), Certified Public Account Personal Financial Specialist, Chartered Financial Analyst, and the Series 7 and Series 66 securities licenses. Everything else is essentially crap.
    Oh and by all means check out your would-be financial adviser and their on Not enough people know about that website and the word needs to get out- if your would-be adviser is not listed on that website or has a long disciplinary history, RUN the other direction. There is no fudging the facts on that website and that’s the way it needs to be.

  3. First thing you need to ask is “are you a fiduciary.” If they are, they are required legally to act in your best interest. If not, they can act in their’s as long as the investment they recommend is “suitable.”

    The difference? Steering you toward a lower cost index fund that pays them almost nothing but give you a great long term return vs a loaded fund that pays them a ton and eats your principal in fees..

  4. You may be right – it all comes down to the individual. I will always check the FINRA records on anybody who is going to be handling my or a relative’s money no matter what their license, and of course I prefer to do business with someone who is referred to me by another satisfied client.
    But somebody with the Certified Senior Adviser, Certified Senior Retirement Specialist and many other so-called “licenses” that have been made up by for-profit companies are instant disqualifiers for me. Take a look at all the financial professional designations that FINRA has identified at
    All these designations listed on the website are not accredited or endorsed by FINRA in any way, it simply means they have identified them as being out there and it’s up to you to decide the validity of somebody who claims to have such a designation. The number of different designations is staggering, and there are an endless amount of designations that have no educational requirements, no way to check the professional status of those claiming to hold them, no formal complaint process and either no formal accreditation or accredited by the same organization that issues the designations and sells the test review materials. On top of that there are many designations where the issuing organization is now defunct, but yet there are still people out there claiming to have them. So many of these designations are created by sophisticated con artists who think they can create something that will impress would-be clients simply by adding “Certified” to the designation name, and sadly, they are all too right most of the time.

    1. No, it all comes down to their duty. If you get an honest advisor whatever their title that cares about you and your wealth plans it doesn’t matter what certifications and titles they have. If you get a thief, the only thing that is going to give you any type of recovery is if that person had a fiduciary obligation to you and they didn’t, you can file suit over that, but none of the others. Of course the issue is how do you tell the thief from the others.

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