This is a follow-up to my recent interview with Preet Banerjee which can be found here.
After being disappointed with my once a year mutual fund check up at my bank I thought it would be a good idea to switch to a financial institution that dealt with just investments. I figured my adviser would be looking out for my best interests but in the end I should have paid attention to earlier signs that he was only in it for his own benefit.
Signs your adviser doesn’t know anything:
He wants to be friends – What? Friends? I don’t want another friend, nor do I need an invite to your kid’s birthday party, I need someone to help me meet my financial goals. All my adviser talked about was meeting up for coffee or lunch with my then girlfriend now wife. It’s now obvious to me he just wanted be friends so he could get into my social circle and get more business. Plus it was just creepy.
His services are free – Free! I love Free, where do I sign up? Okay not free but it was a tiny fraction of a percentage which would cost me nothing according to him. Oh wait that fraction of a percent comes from a bigger percentage called the Management Expense Ratio. I would later find out that all my funds also had a Deferred Sales Charge too. Great, no mention of MER’s or DSC which could cost 10′s of thousands of dollars probably more. Nothing in life is free.
Old technology – Whenever I met up with him I could not stop staring at his laptop. This thing was HUGE it was at least 7 years old, he always had to sit by a power outlet, there was no wi-fi so he could never show me up to the minute info and half the time it wouldn’t even boot up. Did I mention he didn’t own a cell phone and this was the year 2009?
Life Insurance – He kept pushing insurance. This is one area where I had some knowledge so I stated to him that I have no dependents and no debt so why do I need insurance? His response, oh it’s a tax shelter. Okay sure but I still don’t need it now. His second response, it’s how all the rich people get rich. I’m pretty sure insurance only makes the people selling it rich.
No Previous Experience – When I met my adviser he was a security guard at my company. Yes even I’m face palming as I write this. He always talked about how he had a finance background and was just taking a break. I now suspect his financial “knowledge” was limited to what his employer sold and a license to sell mutual funds. Seriously some companies will hire anyone, a fair amount of people working at financial institutions really have no financial knowledge or background.
The Big Picture – He never asked me about my employee benefits. My employer offered a Defined Benefit pension plan and basic life insurance. At the time I didn’t understand pensions and I thought I was already doing a good job saving, so I didn’t look into it. A real financial adviser would take a look at all benefits available to you, if you have a DB plan they would tell you to jump on that. Actually I’m pretty sure my guy would have continued to push life insurance.
Broken Hand – One meeting he had a cast on his hand. I asked if he was okay and if he was in an accident? His response was his hand had met the face of someone he didn’t agree with. How do I even respond to that?
I was able to leave my adviser and his company in the end without paying any fees because I had evidence, including e-mails and hard copies, that the plan he had set me up with didn’t meet the goals I was trying to reach and seemed to mainly line his pockets. His superiors agreed with me and I found out six months later he was let go after an internal investigation revealed he had similar problems with other clients.
The upside of this whole situation is that it taught me to take personal finance seriously; no one will care more about your money than yourself.
This post first appeared at canajunfinances.com, it was the first time I ever wrote a piece on personal finance.