Human Financial Advisor Horror Stories

Put it this way, have you ever been to a circus? You have! Well, remember those people who made you laugh? Finance advisers can also do this. But they can also make you cry. Here’s a funny story—true as well.

We had a clown, visited us as they do for many years, charging us fees, etc. Also, fees that were not revealed to us, which we discovered later. Well, after 13 years of having him sponge off us, we realized he had F.C.ED us, big style. He said the investments were not taxable as they were a specific type of investment.

Well, we realized these were taxable when we questioned him, asking, "Why did you set these investments if they are taxable?" He ran away and left us with a tax bill of 13 years, plus interest.

People will say, "Why did you not make your own enquiries into what is taxable and what is not?" Well, the answer to that is because we were paying a professional.

Well, it cost us dearly, so make sure it doesn’t happen to you. Leave the clowns in the circus!

We are in the midst of looking elsewhere as we speak. Our guy is not untrustworthy. It’s just that when I ask for a simple projected income statement for post-retirement, he worked for two weeks on it and said he just couldn’t produce one. It seemed like a simple request.

I'm a tax attorney, so I see a lot of other people's finances.

The ones I see that work with a financial advisor are, without exception, paying at least 1% of AUM in fees to be in higher-costs funds that underperform the index funds in the long run. To make matters worse, the financial advisors choose tax-inefficient funds and take their fees in the most tax-inefficient way possible. I have also found that many do not understand the nuances of self employed retirement plans or the backdoor Roth.

In my view, there are a few problems with the industry. First, most financial firms hire salespeople and then teach them finance, instead of hiring people who already know finance. I know a LOT of morons working in Edward Jones shops and the like, who are charming but ultimately don't understand the back end of the products they sell. My ex worked for two of the large regional banks in my area, and she had a degree in communications.

She knew (and knows) nothing about finance, but instead was hired because her family is wealthy and gets referral business from old neighbors and classmates. She couldn't even pass the Series 7, but the banks thought she could work in trust management. I talk to clients and financial advisors all the time who don't understand the difference in tax efficiency between mutual funds and ETFs, or the mechanics and reasons of a 1031 exchange, or what the tax incentives actually look like in various types of accounts, or the merits of a solo 401k vs a SEP IRA.

When you only have a hammer, everything starts to look like a nail. Second, the incentives are rarely aligned in the middle of the market or below. Helping a 24 year old set up and fund their Roth IRA is probably not worth your time on the front end unless you're getting an outsized commissions, which ultimately cost the client more money than needed for someone with a small account.

I recently started seeing a financial advisor at First Command I met through a mutual family friend. The advisor is obviously very knowledgeable about retirement and investing, but I can't help but think the funds they are suggesting I invest in are more for their profit than my well-being.

They suggested a couple of accounts through Fidelity Advisor that have large percentages to invest in (some of the percentage goes to the advisor). The funds have a good history, but I can't tell if it's a smart move for me or if they are just trying to profit. Additionally, the advisor suggested a whole-life insurance plan.

They explained how they profit from it (basically, the cash value goes to them the first 2 years), but it still seems like a good plan to me.