My experience with a financial advisor

In this post, I want to share my experience in working with a financial advisor.  As a disclaimer, I’m in no way generalizing that all financial advisors are like this, I simply want to share my own personal experience.

I was early in my career in private accounting and never thought about seeking out a financial advisor to help me with my finances.  All I knew was to take advantage of my company match on my 401k and to focus on paying off my car loan and student loans.  In the church I used to attend, I was helping as a high school counselor for the youth group when a fellow counselor asked if I would be interested in seeking help with a financial advisor.  He recently became one and offered to look at my finances.  I knew him and his family well and he seemed like a trustworthy guy so I took him on the offer.  During the consultation, he recommended that I rollover my 401k plans from my prior employers to a traditional IRA (individual retirement account).  A year into working with him, he had to take a leave of absence as my financial advisor so someone else from the firm took over.

I was contacted by this new financial advisor and he wanted to meet with me in person to get to know me better.  We scheduled a meeting and I drove to meet him at his office.  He wanted to know what my goals were and my risk tolerance.  Based on what I shared, he recommended that I get a variable annuity plan because it offered a guaranteed return.  I liked the idea and signed up for it.  He then asked for names and numbers of my friends and family that would be willing to work with him; this is where I start to get uncomfortable.  He told me to give him a minimum of three names so that he can call them and see if they would be interested in working with a financial advisor.  I really didn’t want to give out those names and numbers but I didn’t have firm boundaries for myself back then so I complied and gave him the names and numbers of my family and friends.

A week later or so later, I got contacted by some friends and my brother asking who this person was that contacted them.  I felt terrible about it and told them they can ignore his request.  In the meantime, I started putting in money toward this variable annuity.  There was documentation for this variable annuity but I really couldn’t understand what it was saying.  I felt uncomfortable about this investment and contacted the financial advisor with more questions I had about it.  He gave me vague answers and it seemed like he didn’t quite understand it that well himself.  After a few months of putting in money to the variable annuity, I told him I want to cancel it.  As a result, I lost money in something I didn’t really understand and felt I was hustled.

Here are some takeaways to learn from my experience:

1).  If you plan on working with a financial advisor, ask them how they are being compensated.  Is it a commission?  Is it an upfront fee?

2). Ask your advisor if he or she is a fiduciary advisor.  Fiduciary means they are legally obligated to act in your best interests.  It would seem like this should be what all financial advisors should be but this is not the case.  They can also follow the suitability standard of conduct which means they can sell you a product if you qualify for it; not necessarily if it’s in your best interests.  There is a current debate going on in America over these two standards.  If you would like to read more about it, here’s a link.

3). Make sure your advisor is knowledgeable about the product he/she is recommending to you.  Your advisor should be able to answer the questions or concerns you have about the product.

4). Never ever feel pressured to give your advisor the contact information to your friends and family.  Contacts should be as a result of trust built over time, not as a result of high-pressure sales tactics.

5). When in doubt, walk away.  You will buy yourself time to do further research and come up with a decision that is more well-thought out and informed.

Even though I lost money because of working with this particular financial advisor, I’m glad I was able to cancel early on and learn from my mistakes.  To this day, I do not use a financial advisor but am open to working with one in the future now that I’m older and wiser.



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