Article: Financial Advisers Flunk Undercover Sting

[soupcxan]

More empirical evidence from a Harvard/MIT study that financial advisors are only looking out for one person's interests...it's amazing that this industry continues to operate this way.

So, when the actors came into these offices, what happened? Basically, the advisers advised the dummy clients to do a whole lot of things that were in the advisers' interests, while making some adjustments based on just how much they thought the clients could be persuaded to do.

Financial Advisers Flunk Undercover Sting - SmartMoney.com

 

[FinanceDude]

I would love to have a discussion if this thread gets some momentum. All I see is a lot of bias involved. Interesting that 70% of the "fake clients" would go back and see those advisors..........hmm..............

 

[73ss454]

These people are salespeople and trying to make a living. I don't believe for one minute that they have anyone's interest at heart except their own.

About 6 years ago a member of my family received 2.5M in an ins. settlement from a death. After her husband died in the car crash she went to see a friend of her husbands who was in the brokerage business. He promptly sold her 3 annuities eating up the total amount and a LI whole life policy for 19K a year. She was 61 with no dependents at the time.

Now it's 6 years later and the annuities are about to expire. She said the other day that she trusts this guy and is going to give him the money again so he can do what he want's with it.

Hey it's her money let her have a good time with it. I told her once and that's that, she don't listen.

 

[MasterBlaster]

Does this study actually surprise anyone ?

 

[haha]

Hey it's her money let her have a good time with it. I told her once and that's that, she don't listen.

A wise choice I believe. My Dad sometimes said- unless you live in the same house, eat at the same table, or sleep in the same bed, it's not your business.

Ha

 

[Keim]

In other news, dogs bark and cats meow. Wait! This just in. The sun will rise tomorrow!

 

[MichaelB]

Having seen how some people manage their money, these financial advisors might not be a bad option.

 

[gerntz]

Having seen how some people manage their money, these financial advisors might not be a bad option.

 

[FinanceDude]

Does this study actually surprise anyone ?

The surprising thing is that the sponsors of the study were surprised that the advisors advocated making changes.

They put out 4 portfolios, right?

1)"Chasing Returns" portfolio. No much said about this. Quite honestly, I send folks like this to TD Ameritrade or Etrade and let them go crazy. Folks like this don't listen to advice anyways, so are not a client most advisors want......

2)Portfolios heavily weighted in company stock. Not much said about this either. Of course, logic would say the advisor would try to diversify the client's investments. I am sure the lessons of Enron and others would show that having 75-100% in company stock only is a bad idea. The sponsors said they were surprised that the advisors changed around the portfolios.really??

3)Diversified low-fee index portfolios. I think the article said the advisors "blatantly" moved fund into higher cost MF and such......hello there, bias anyone? That is what I consider a DIY investor, why even talk to an FA if you don't want them to give ideas?

4)All cash - wow, the article suggest the advisor might be most helpful here, since the investor has no plan.........

 

[misty57]

When we were very young (mid to late 20s) we had saved a lot of money and decided to talk to a neighbor who worked for Dean Witter. He talked to us about investing in oil and gas and gave us a prospectus to take home and read. It did not take me long to figure out that we did not qualify for the investment in terms of our income or net worth.

I started to think about it and it dawned on me that if these guys were so smart, they would not need to work for Dean Witter as salesmen...uhm, I mean financial planners.

We never bothered seeking advice from a commission based FP ever again.

 

[FinanceDude]

When we were very young (mid to late 20s) we had saved a lot of money and decided to talk to a neighbor who worked for Dean Witter. He talked to us about investing in oil and gas and gave us a prospectus to take home and read. It did not take me long to figure out that we did not qualify for the investment in terms of our income or net worth.

I started to think about it and it dawned on me that if these guys were so smart, they would not need to work for Dean Witter as salesmen...uhm, I mean financial planners.

We never bothered seeking advice from a commission based FP ever again.

Yeah, how can you trust planners whose office is in a Sears store?

 

[M Paquette]

Yeah, how can you trust planners whose office is in a Sears store?

Only if the investments come with the old Craftsman Tools warranty. "My value-weighted fund broke. Gimme a new one with my original balance."

 

[FinanceDude]

Only if the investments come with the old Craftsman Tools warranty. "My value-weighted fund broke. Gimme a new one with my original balance."

How BIG would have been the "Craftsman Portfolio"..........

 

[misty57]

Yeah, how can you trust planners whose office is in a Sears store?

Is that where Dean Witter is now? Really? I haven't had any money with them in decades.

 

[Finance Dave]

I guess it surprises me in one way. I would think it would follow more of an "80-20" rule...with 20% bad apples....but it seems more widespread.

It's a shame things are this way...hate to see people get taken advantage of.

 

[FinanceDude]

I guess it surprises me in one way. I would think it would follow more of an "80-20" rule...with 20% bad apples....but it seems more widespread.

It's a shame things are this way...hate to see people get taken advantage of.

There are about 700,000 registered financial advisors in the US. 20% would be about 140,000. That would be a BIG number. Did you read the last part? 70% of the "fake investors" plan on going back to those same planners with their OWN MONEY after the study was over. Why is that?

 

[FinanceDude]

Is that where Dean Witter is now? Really? I haven't had any money with them in decades.

Sears sold them off a long time ago.