A Financial Advisor Makes Money
Today’s inspiration comes courtesy of All Financial Matters (a solid blog with good hard numbers data) who notes that a Money Magazine article called “The Mole” discusses how just because a financial advisor says he puts his clients first doesn’t mean he does. Really? Did I miss something? If it says “I put my clients first” on an attorney’s website does that mean that he does, or does it depend on the attorney? Are there doctors who over bill your insurance company to boost their income? Does a waiter ever suggest a more expensive wine to increase his tip? I’m shocked, shocked, to find out there is gambling going on in here! All of this, of course, is why you need a good trusted financial advisor in the first place, but that is not why we come here today. I want to show you something from “behind the scenes” as the Mole says. Financial Advisors and Commissions Let’s make up a fake client with a $500,000 account to be invested. Let’s ignore all taxes and legal implications for the sake of simplicity and concentrate on commissions. We’ll also assume that the account value stays the same over the years for …