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    7 Questions You Must Ask to Keep a Financial Adviser Honest (by Tony Robbins)

    Doctors, lawyers, and certified public accountants in the United States are legally required to act in the best interests of the people they serve. Yet financial advisers get a free pass. There are more than 200 different designations for financial advisers, including “financial consultants,” “wealth managers,” “financial advisers,” “investment consultants,” “wealth advisers,” and — in case that doesn’t sound exclusive enough — “private wealth advisers.”

    But the reality is, of the roughly 310,000 financial advisers in the U.S., less than 10% are legally obligated to put your interests first at all times on all of your accounts. These are called “registered investment advisers” or RIAs for short. RIAs don’t accept sales commissions. Instead, they typically charge a flat fee or a percentage of your total assets for unbiased financial advice. It’s a cleaner model that removes awkward conflicts of interest and hidden agendas.

    As for the other 90%, they’re simply brokers in disguise. Many of them work for enormous Wall Street banks, brokerage houses, and insurance companies — the kind that splash their names on sports arenas.

    Why does this matter? Because brokers have a vested interest in hawking expensive products, which might include actively managed mutual funds, whole-life insurance policies, variable annuities, and “wrap” accounts.

    Don’t get me wrong, this is not an indictment on the good people that work in the industry. I have lots of friends and clients in the financial industry, so I’m speaking with firsthand knowledge when I tell you that they — and the vast majority of their colleagues — are people of real integrity. They have good hearts and good intentions. The trouble is, they work in a system that’s beyond their control — a system that has tremendously powerful financial incentives to focus on maximizing profits above all else.

    Life success coach Tony Robbins tells you why the next crash is the best opportunity to jumpstart your financial future.

    This is a system that richly rewards employees who put their employer’s interests first, their own interests second, and their clients’ interests a distant third. Even the best-intentioned financial advisers are often working within the confines of this system. They’re under intense pressure to grow profits, and they’re rewarded for doing so. If you — the client — happen to do well, too, that’s great. But don’t kid yourself. You’re not the priority.

    And for folks like you and me, that’s a recipe for disaster — unless we take the precaution of learning how the system works against us, and how to counter it. How do you start? By making sure to ask these seven questions of a financial adviser, or any adviser, you are considering:

    1. Are you a registered investment adviser?

    If the answer is no, this adviser is a broker. Smile sweetly and say good-bye. If the answer is yes, he or she is required by law to be a fiduciary. But you still need to figure out if this fiduciary is wearing one hat or two. That’s because Its not enough that your financial adviser is an independent RIA. You need to be careful that the RIA is not also a broker.

    You heard that right. In a strangely allowable arrangement, an RIA can be both a broker and a fiduciary in a process called “dual registration.” When someone is “dually registered,” at one moment they play the part of an unbiased adviser, reassuring you that they abide by the fiduciary standard and can provide you with conflict-free advice for a fee. But they can switch hats and act as a broker, earning commissions or kickbacks by selling you specific products. When they’re playing this broker role, they no longer have to abide by the fiduciary standard. In other words, they’re sometimes obliged to serve your best interests and sometimes not. How warped is that? These arrangements are perhaps the most dangerous for consumers as it creates immense confusion.

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    tony robbins

    This is the first of a series of articles from life- and business strategist Tony Robbins on sharpening your investing and personal-finance skills.

    Source: MarketWatch.com

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