From Darkness To Light
Eliminating Willful Ignorance
Whether working in a career or building your enterprise, you work hard for your money. Managing your day-to-day affairs is difficult enough, never mind having to think about financial markets or the plethora of investment products out there. Making financial decisions on your own behalf seems daunting, and it can be. Many don’t want to learn about markets and how they work or discover the best way to grow their wealth.
They rather outsource the activity entirely and forget about it. After all, it’s too complicated, right?
This can go even as far as not wanting to educate yourself on the topic at all and, in so doing, become utterly dependent on the professional you hire.
This may be acceptable for some, but it’s unacceptable for the would-be wealth creator, in my opinion.
I classify this as willful ignorance.
Everyone’s circumstances are intimately unique. In Canada, the average person’s first encounter with investment advice may come from a local bank branch representative - The “advisor.” You sit in their office, tell them your age, risk appetite and allocate your money. Trusting that they will make decisions in your best interest.
The Financial “Advisor” and the models they allocate your financial capital toward are two entirely different things. The model allocated to is unmanaged by the advisor at a bank branch level. They are salespeople primarily, not the creators or managers of these investment models.
The advisor’s value proposition is not only the model(s) they allocate to but is also about how good they are at keeping up with their clients. In other words, do they care about you enough to have your best interest at heart? Are they proactive about your needs? Do they respond to your inquiries in a timely manner?
“I play with people’s money for a living.”
Financial Advisor, Summer of 2023.
I’m sure she thought she was funny when she said this. This was an advisor telling me what she does for a living, unaware of what I do for a living. To say that it pissed me off is an understatement. Can you imagine handing your personal savings over to someone like this? Or worse, your Family’s legacy?
Now, I am not saying that all Financial Advisors are bad. I believe they provide a necessary service and investing capital this way may be better than not investing at all. But you must be very careful about which ones you trust.
The danger of choosing the wrong one doesn’t hurt you immediately. In most cases, I argue, it’s something that hurts you over a long period of time. It is insidious, and just like the old metaphor about boiling a frog, it happens low and slow until you discover you are down 20% during one of the biggest bull markets of recent years (this happened to an acquaintance), all the while paying management fees.
The cold hard truth
You can’t expect world-class on a budget. But you can educate yourself, be an informed investor and work your ass off to gain access to better service providers.
Cheap is expensive.
Incentives
You are one of thousands of clients. By default, incentive on the part of these advisors is about simplicity and not about what’s best. They primarily sell products with little to no fiduciary obligations to their clients. Again I am not saying that all advisors operate in an unethical manner. But I am saying that you may have very little recourse if they do.
It would be best if you worked toward being one of a few hundred clients and eventually one of a handful (Multi-Family Office).
Can I get an “e”?
The Financial Adviser, separate from the advisor, provides you with actual financial advice to help you create a long-term financial strategy. They have ethical and legal obligations towards you as a client. In Canada, advisers need to have specific licenses depending on the province. Titles such as Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), and Chartered Investment Manager or Chartered Financial Analyst (CIM/CFA) require years of experience and additional education. An adviser’s duty is to serve you as the client, not sell products for the bank employing them (Kismet Wealth Group, 2020).
In Short, Advisor is an unregulated term in Canada, while Adviser is.
From Darkness to Light
While investing in financial markets might seem daunting, blindly outsourcing decisions to professionals can lead to lasting consequences. It’s crucial to differentiate between a financial “advisor” and a genuine financial “adviser.”
Achieving financial success demands an active role in your affairs. Choosing quality guidance requires both self-education and diligence on your part. Not all professionals are equally committed to your best interests, which means seeking out those bound by ethical obligations to you. By embracing knowledge and taking control, you can navigate the path from darkness to light and pave the way for a more secure financial tomorrow for you and your Family.
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Disclaimer: The Nano Family Office provides research only and does not provide financial, legal, or estate planning advice. As always, consult with registered professionals and seek proper guidance for your affairs.
Sources:
Kismet Wealth Group (2020, March 20). Financial Advisor vs. Adviser. Kismetgroup.ca. Retrieved August 21, 2023, from https://kismetgroup.ca/financial-advisor-vs-financial-adviser/
Additional Information & Reading Material
Canada
https://www.moneysense.ca/save/investing/financial-advisor-or-adviser/
United States
https://www.finra.org/investors/investing/working-with-investment-professional/investment-advisers