In John 10:12, Jesus tells the story of the shepherd and the hired hand. The hired hand cares nothing for the sheep, but the shepherd is successful because he cares for the sheep. You know people who are hired hands, they don’t care about their employees or their customers, and you know people who are shepherds. Shepherds and hired hands also exist in the financial industry. This week’s guest, Doug Amis, CFP and author, joins Hans and Robby to discuss what to look out for when trying to select a financial advisor.
CFP’s, who have to be fiduciaries, are required to put their customers best interest first. In the parable, a fiduciary would be the shepard. CFPs are not the only fiduciaries though, CPAs, lawyers, and doctors all have to act as fiduciaries.
Doug talks about his grandfather, whose financial statements he reviewed. He realized that many of his holdings were not competitive, and he was paying high fees. Doug made sure to go through and fix this as the person his grandfather was working with was not a fiduciary. Robby had a very similar situation with his father right before he passed, when an agent tried to sell him stocks on his deathbed.
Doug says that you need to ask for the fees the advisor or agent charges. Also ask if they are working as a fiduciary. These are very basic questions that advisors should be able and willing to answer.
If an advisor does not have to follow a fiduciary standard, they must follow suitability standards, which means the product is suitable for the client. It does not have to be the best policy in any way. Advisors only have to ask 9 questions according to FINRA to make sure a product is suitable.
Lastly, Hans, Robby, and Doug talk about annuities, and how important it is to find a fiduciary when you are searching for this product.
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