An opportunity, or a pig in a poke?

March 19, 2009 8:21 AM

How do I get the most out of a meeting with a financial advisor I don't particularly trust?

I have a meeting this afternoon with a financial advisor at my bank, to discuss investing strategies and wise places to put money in this economy. This meeting was requested by him, not me.

A little background: I dealt with this individual when opening an RRSP for myself eight months ago, and was not at all pleased with how the process was handled. It took a couple of months to get the RRSP set up, because he repeatedly botched the process. Now he wants a meeting with me to discuss my investments (I presume he means the RRSP), but because of past experiences, I am extremely suspicious of him.

Add to this the fact that I am not at all a "numbers person". So much so, the minute he starts talking about the various options the bank offers, my brain ceases to be able to process the information. I might as well be listening to white noise.

I'm prepared to at least talk to the guy, because I understand that it's his job to sell services to the bank's clients, but I want to go in with eyes wide open. I don't want to be sold a pig in a poke!

Financial-savvy Mefites, what are some strategies you recommend for me to get the most out of this meeting?

(This is in Canada, in case that makes any kind of difference)

posted by LN to work & money (10 answers total)

I'm confused. Why would you need to talk to him at all?

And if you wish to talk to someone, why does it have to be him and not someone else? Can you request to be assigned to another individual?

And finally, it is a sign of sanity and good health not to totally trust ANY financial advisor.
posted by St. Alia of the Bunnies at 8:24 AM on March 19, 2009

Find another financial manager. There are ones that will take you round in loops spewing numbers about their products and in the end, you still have no idea what they are doing with your money. Especially in the current economical state, they need to sell these products to keep their jobs.

You need someone you can trust and give you straight information. Remember, its your money and you've got the final word.
posted by telsa at 8:39 AM on March 19, 2009

Go in, listen to him, take all the brochures for the different mutual funds on offer, etc, then go home with them. Do not sign anything today. Bring it home, study it, find your financially savvy friends and relatives and ask them. He is likely to want you to continue to contribute to your RRSP and to begin contributions to your TFSA. (If you have enough cash flow, these are both good ideas which can be done next week or next month, once you've figured things out.) Ask questions about fee structures for the funds. Ask about his fee structure, if you like -- it's good to know what his incentives are. (For a fund fee structure, you will get the actual percentage; for his, you might find out if it's salary only, salary + commission, or commission only. This information might be online. It is almost certainly the same for all banks.)

Financial advisors in Canada are required to update your plan yearly. (By which I mean: risk tolerance, whether it's a long or short term need, related issues.) They usually do this after RRSP season, and he may well be doing it now. Feel free to fill out one of the forms and see what it says. It can be useful to see where they say you fall on risk-tolerance, and what they say is about that level.

If you're sticking with mutual funds, the vast majority of banks offer nearly identical funds.
posted by jeather at 8:40 AM on March 19, 2009 [2 favorites]

I have a meeting this afternoon with a financial advisor at my bank, [...] This meeting was requested by him, not me.

Assume for a second the guy told you he was a 'financial salesman' instead of a 'financial advisor'. Would you be going to this meeting?

What do you suppose is the difference between a 'financial salesman' and a 'financial advisor in the employ of a financial supplier'?

Financial-savvy Mefites, what are some strategies you recommend for me to get the most out of this meeting?

I'd do what jeather suggests; don't make any immediate decisions, if he suggests products that appeal to you, take his sales literature home and compare it to competitors' products.
posted by Mike1024 at 9:02 AM on March 19, 2009

I think you'd be best served by spending that hour looking online for an advisor you can trust.

It's not just that you don't trust the guy, it's that a good part of the financial services industry is built on giving captive customers the hard sell for bad products. He's not having a meeting with you to do you a favour, he's looking to sell a product that he will get a nice commission or bonus for. Don't waste your time.
posted by Nelson at 9:02 AM on March 19, 2009 [1 favorite]

DTMFA. Find a competent one who you trust.
posted by liquado at 9:23 AM on March 19, 2009 [1 favorite]

Financial advisors at banks are there to sell you "services" and otherwise make more money for the bank. That's their only role. Go ahead and cancel the meeting if you want -- be prepared for a lot of warnings and pressure if you do. Or you can go, write down the 'facts' they give you, and then use those claims as a starting point for more objective information.
posted by wryly at 9:58 AM on March 19, 2009 [1 favorite]

Cancel. I once got a lump sum of 401K money and needed to park it at a bank while I decided what to do with it. A banker there kept bugging me to meet with him, that every day it was in the money market it was losing money, etc. He made me feel so pressured and insecure. I kept stalling. He got me so annoyed, I finally rolled the money over to Vanguard then boned up on investing and invested it myself. You're the customer. It's a don't-call-me-I'll-call-you-when-I'm-good-and ready-situation.
posted by Elsie at 10:20 AM on March 19, 2009

As a financial advisor in the US, I would agree with other posters here. If you do not trust a financial advisor, for whatever reason, seek other counsel.

However, I would hesitate to say you should just do this yourself. As studies by Dalbar indicate (http://www.qaib.com), individual investors significantly underperform their investments. This is primarily due to poor investment behavior such as trying to time the market, having too much of their portfolio in one investment, panic in down markets, greed in boom markets, etc.

Just as many individuals would be willing to pay for someone to do their taxes, I think it is reasonable for some individuals to pay for their portfolio management.

A good financial advisor that focuses on educating clients, understanding their financial goals and risks, and insuring proper asset allocation.

Furthermore, while you might not be familiar with financial markets or individual financial products, you are probably very familiar with people, and can spot individuals who could be duplicitous or not operating in your best interest.

Here are some questions to help you make sure a financial advisor is acting in your best interest.

* How much will you get paid in dollars and as a percentage of my investment if I make this transaction? How much will your firm get paid? (If you sense any dancing around this issue, be more skeptical).

* Are there any ongoing fees either to you, your firm, or this investment that I need to know? (This should be detailed in a prospectus. Your financial advisor should pull that out at this point. If he or she doesn't, be more skeptical.)

* Is there are cheaper way for me to accomplish the same goal and still keep you as my advisor? (There might be cheaper ways, such as index funds, but your advisor might not be able to offer them due to the relationships between some companies and your advisor's company.)

* What are the positives and the negatives of this investment? (There is no such thing as a perfect investment. Make sure that you understand the downsides.)

* Are you compensated more for offering this investment than another investment, either in financial terms or in some sort of non-financial award? Is there a contest for this investment? Can you tell me any conflict of interests you might have? (These might not be reasons to avoid investing, but you should know about them ahead of time.)

* How does this investment fit in with my overall investing strategy? What is your investing philosophy? (You might not understand everything on the first go here, but you should always ask this. A good advisor is a good teacher, and should be able to explain this to you. Also, look for words like "asset allocation" and "diversification".)

* What sort of return do you think this might get next year? (If this is an equity investment, then this is a trick question. Your advisor should say that they do not know. They should not even guess. If they do, you should be more skeptical because they may be more interested in telling you what you think you might want to hear, rather than telling you what you need to know.)

* Is this an annuity? (Annuities have extra fees, and, in many cases, are oversold due to higher commissions. You should be aware of them .)

Ultimately, you are paying for the advice, so you should know how much you are paying and how objective the advice is.

I would say that 90% of financial advisor are honorable people trying to do the best for their clients. These questions will help you ferret out the other 10%

Good luck.
posted by davidamann at 4:21 PM on March 20, 2009 [2 favorites]

Just to update this question - I did meet with him, and I peppered him with as many questions as I could. I took his literature but indicated that I needed to confirm some things before making a decision.

Thanks to everyone who answered, and most especially to davidamann for such great advice!
posted by LN at 7:27 AM on April 24, 2009