{"id":1920,"date":"2019-02-01T19:59:34","date_gmt":"2019-02-01T19:59:34","guid":{"rendered":"https:\/\/www.pamkrueger.com\/?p=1920"},"modified":"2019-10-18T20:50:36","modified_gmt":"2019-10-18T20:50:36","slug":"the-true-cost-of-bad-financial-advice","status":"publish","type":"post","link":"https:\/\/www.pamkrueger.com\/the-true-cost-of-bad-financial-advice\/","title":{"rendered":"The True Cost of Bad Financial Advice"},"content":{"rendered":"

When you\u2019re talking about financial advice, there\u2019s good advice, there\u2019s bad advice, and worst of all, there\u2019s expensive bad advice. In fact, according to the White House\u2019s Council of Economic Advisers, poor advice costs\u00a0<\/em>Americans approximately $17 billion a year.<\/em><\/p>\n

This Time, it Really Matters.<\/strong><\/p>\n

Imagine you\u2019re about to stop working for good. As in forever. At least that\u2019s the plan. And at that moment when you\u2019re about to step over the starting line into retirement, it\u2019s likely that you\u2019ll seek some solid financial advice. But who\u2019s going to guide your decision-making leading up to this critical point in life? This is a situation where things might either go really well or horribly wrong.<\/p>\n

Do You Choose from the 90 Percent… or the 10 Percent?<\/strong><\/p>\n

There are approximately 500,000 people working as \u201cfinancial advisors\u201d in the U.S.\u2013\u2013and those advisors represent the ninety percent who work for well-known brokerage houses and big-name insurance companies. They are, by far, the most visible to consumers. The problem is, they work as salespeople, paid by their firms\u2013\u2013not by you\u2013\u2013and their compensation is not based on providing you with advice that\u2019s in your best interest. They are paid to sell investments.<\/p>\n

The other ten percent of financial advisors in U.S. are not as conspicuous because they\u2019re not attached to brokerage firms or insurance companies. Instead, they are independent advisors who are held to the SEC\u2019s fiduciary standard, which means those advisors must, by law, always put their clients\u2019 well-being first. Brokers don\u2019t legally have to meet that standard.<\/p>\n

As it turns out, this retirement advice is a more critically important decision than you might ever have realized. But if you\u2019re in your late 50s or 60s and nearing retirement, here\u2019s why this decision really matters.<\/p>\n

Scenario A: No Serious Cash Flow Analysis. <\/strong><\/p>\n

This is what your retirement plan might look like coming straight from any one of several brokers or insurance agents. Note: it\u2019s what you don\u2019t <\/em>get that may count the most.<\/p>\n

First, there\u2019s typically no serious cash flow analysis that guides your spending. No blueprint at all for the long-term. Instead, you\u2019ll likely get a sales presentation that promotes the broker\u2019s investment products.<\/p>\n

Next, there\u2019s no unbiased assessment of your current overall situation that includes your real estate or other assets tied up in 401(k) plans, or expert analysis of your current insurance needs, tax planning or any legacy planning for your children and \/ or grandchildren.<\/p>\n

Third, the majority of the investments are recommendations that pay commissions or kickbacks to your broker (though how would you know this?). These proposed investments are expensive and are not necessarily recommended in your best interest because brokerage firms are not willing to accept fiduciary responsibility.<\/p>\n

Those investments, more often than not, include insurance annuities or other high-ticket insurance products, and your broker will receive his or her commissions, regardless of the outcome for your portfolio.<\/p>\n

Your Investments Can Cost You Tens of Thousands in Overpaid Fees.<\/strong><\/p>\n

Furthermore, if that financial advice consists of expensive, complicated investment products and does not include real planning, your portfolio may easily be tens or even hundreds of thousands of dollars<\/em> lower than it could be simply because of all the fees you overpay.<\/p>\n

After all, every dollar you\u2019re spending in fees and expenses is a dollar that is not invested. But even worse than the excessive and unnecessary fees, it\u2019s those timing decisions that can and will directly affect the rest of your life.<\/p>\n

Ask Yourself a Few Critical Questions.
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\nThese decisions can start with questions such as:<\/p>\n