SACRAMENTO, Calif., June 1, 2010 — After reviewing the disclosure practices of more than 12,500 financial advisors since 2003, Paladin Registry concluded 80% of financial advisors omit or misrepresent information when they sell investment services and products.
Jack Waymire, Paladin Registry founder and author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor (ISBN 0471476994), has been warning investors for years that they make big mistakes when their only source of information for selecting advisors is the advisors themselves. He said, "Advisors have one motivation: Sell investment products and services. Unfortunately, many advisors step over the line when they choose to omit information they do not want investors to have or they misrepresent information so they sound more knowledgeable than they really are. Investors are being naive if they expect advisors to be completely honest. They are salesmen and they have to win to get paid."
Why do so many investors fall for deceptive sales practices? Waymire said there are three primary reasons. "First, investor selection processes put too much emphasis on advisor personalities. They tend to select advisors they like versus advisors with the best qualifications. Second, investors accept verbal information from advisors. They fail to recognize the information is part of sales pitches and they have no record of what was said to them. And third, they do not take time to validate the accuracy of the information they use to select financial planners and advisors."
Waymire is right, and make no mistake Wall Street and its advisors know about all three reasons. For example, Wall Street firms hire advisors with pleasant personalities and sales skills that they use to develop friendly, trusting relationships with investors. Once trust is established, advisors use finely honed sales pitches to sell investors the products that make them the most money. And, since there is no written record of the pitch, less ethical advisors say whatever wins them the most assets. There is close to zero risk of detection because advisors know investors will not commit the time it takes to validate their false claims.
You may conclude investors are frequently their own worst enemy when they select advisors. But, there is a practical solution. Investors can start requiring background checks for advisors that confirm the accuracy of their sales claims. These checks should validate advisor identity, education, experience, certifications, compliance records, disclosure practices, and other data that impact their competence and trustworthiness. The background checks can be conducted by investors or by an objective, independent third party that does the work for them.
ABOUT PALADIN REGISTRY
In 2003, Paladin began providing information services to investors who use the services of financial planners and financial advisors. Our services include Background Checks, Quality Ratings, Online Documentation, and a service that matches investors to five-star rated professionals in their communities. Visit Paladin's website (http://www.PaladinRegistry.com) for additional information.
KEY CONTACT:
Jack Waymire
Founder & Author
Email
(916) 253-3334 (CA)
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