Soundbites and Sales Tactics: Why I Couldn’t Trust a Single Financial Advisor with My Money
I’ve had initial chats with two, and met two at parties. No horror stories, but all four left me certain that I wouldn’t trust them with a penny of my money. The two I met socially gave me the strong impression they had no idea what they were doing and just parroted dubious soundbites like “you’ll never lose money in property” or “you can’t go wrong with bonds”.
One had been in agriculture before getting a job at his father-in-law’s advisory firm.
I tried to chat to them about more complex post-recession low-interest rate stuff and they kinda changed the subject and just went back to soundbites. The two I actually spoke to about getting advice, one didn’t know how to deal with crypto and promptly ghosted me, the other also appeared to lose interest once it was clear I wasn’t just gonna buy life insurance and commission products. All four did the 1980s sales-y bullshit like using my first name constantly (one of them calling me by the wrong name over and over).
So (while I know every industry has its bad apples), my own personal experience has been that 4 out of 4 had strong scammy used car salesman / estate agent vibes. So basically, they’re the last people I’d hand over money to.I manage my ~£0.5m portfolio myself.
Related Horror Stories
"Safe investments"
Just filed my taxes and I’m looking more closely at my finances. I’m pretty good with the basics but feel completely out of my depth with investments.
In 2021 I started a Morgan Stanley investment account with the financial advisor who has been managing my parents’ money for many years.
I invested $67,000 in 2021 and let the advisor choose the stocks/bonds/funds/etc, telling them that I’m extremely risk adverse and I needed safe investments. On Jan 1, 2022, the value was $71,950. On Dec 31, 2022, the value was $58,587. In 2022, I paid $1,025 in trade commissions and $984 in service/advising fees. So basically I paid my advisor $2,000 for her to lose me $13,363 over the course of 2022.
Is this normal? Every time I ask my parents or advisor they tell me “the market is down for everyone.” But my parent love their advisor and thinks the sun shines out her butt and my advisor has a financial incentive to keep me.
The “I Like to Churn” Advisor
And no, we’re not talking about churning butter. I was talking with another potential client who was considering switching advisors and although they lived in a small town in the Midwest, they had somehow started doing business with an advisor out of New York. They had been with this person for several years and had a hunch that things weren’t all what they seemed.
They thought perhaps the advisor was selling funds and buying other funds just for the sake of earning a commission, and since I was the guy they were considering hiring, they were interested in me taking a look. After reviewing their account statements and the trade confirmations, it was quickly and easily obvious that was what was being done.
Sure enough, the advisor was selling A-Shares; another type of mutual fund, and turning right around and buying other B-Shares, sometimes it was the exact same fund. It made no sense other than the fact that the advisor made a commission on each of those trades.
Lesson Learned: If you are using an advisor on a commission-based relationship, be on the lookout for an influx of unusual trade confirmations. If you see a lot of activity, it might be worth inquiring about.
Margin Calls Destroyed My Early Success
I had set aside some money to invest into stocks. So opened an account with Internaxx bank and took out a cheap subscription under a special offer with the Porter Stansberry tipping sheet.
It was around 2010 and I did remarkably well, quickly building up a nice little portfolio and collecting dividends and watching as the values increased. What could go wrong? I had a phone call from some broker in the UK who specialised in pre IPO stocks and floatations so listened and the guy explained how using CFD’s you could leverage up your position and take control of a much bigger slice of the action and make a huge amount of money…….. I think some rich guy like Warren Buffet once said if you do not fully understand what you are investing in just give it a miss. So a new account was opened and I started off making my fortune.
Well no, I ended up with a black hole which had these things called margin calls which gobbled up cash like there was no tomorrow. I quickly realised that this was not working and bailed out pretty quickly but then got into leveraged trading on gold……… It was an interesting 6 months and taught me that I was not really understanding what was going on and I would never cut it as a trader so there was something positive at least.
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