Financial Advisor or Product Peddler?
The financial industry managed to get quite a bad reputation in South Africa, because many people were calling themselves “financial advisors”, while they were actually nothing more than product peddlers.
I wrote an article a few days ago where I explained what a financial advisor is, where I said that it is a good idea for anyone to consult a financial advisor, and have him draw up a financial plan for you.
But how can you tell the difference between a financial advisor and a product peddler?
| Financial Advisor | Product Peddler |
|---|---|
| Will usually charge an upfront fee for the financial advice they give, typically between R400 and R1,000 per hour. | Will usually offer their “financial advice” for free. |
| Is primarily motivated to give valuable financial advice, that is in the best interest of their clients. | Is primarily motivated to sell financial products, that will generate the maximum amount of commission. |
| Is interested in building long-term relationships with their clients. | Is interested in making as many quick sales as possible. |
| Want their clients to understand their own investments, insurance policies, financial plan, and other financial affairs, so that they can be good stewards of their own money. | Doesn’t really care whether their clients understand their investments or insurance policies, or anything else for that matter, as long as they can make a sale. |
| Will go to a lot of effort to explain all the costs and fees of the financial products they recommend, to make sure his clients understand exactly what they are getting, and how much it will cost them. | Will often try to hide the real costs and fees of the products they are trying to sell, or cleverly shroud these fees, using methods like confusion, smooth-talk, and even outright dishonesty. |
| Will have many other happy, satisfied and thankful clients, whom they will be more than happy to provide as references to their prospective clients. | Will have many disgruntled and/or confused clients whom they’ve managed to make some money out of in the past, and would rather not let any of their prospective clients find out about. |
If you would like to learn more about what you can expect from a good financial advisor, and what qualities to look for in a good financial advisor, you can read this article that explains what a financial advisor is.
