If you are thinking about hiring a financial advisor — paying someone to manage your money for you — then you should be aware of the lies they might tell you.
I personally don’t use one and I believe in most cases, you shouldn’t either. Here’s four lies many so-called advisor will tell you.
‘The time to act is now’
Some advisors will tell you that the time to put your money into the market is right now. They will tell you this regardless of what is going on in the market. It doesn’t matter to them if it’s a bull or bear market, all they care about is having your money in the market.
They say this because many brokers only get paid when they put your money into the market or they buy companies for a specific commission.
This means they will almost always be willing and eager to put your hard-earned money in without hesitation, so they can see their compensation rise.
Naturally, financial advisors are trained in something called the “efficient market” theory.
This means that the value of all companies match their price at all times. Another way to look at it is that companies never “go on sale.”
This means that anytime is a good time to invest, but this is not the case. Stocks sometimes are mispriced and represent a bargain if purchased below their real value.
‘You can’t beat the market’
This may very well be the first thing they tell you in order to scare you into giving them your money. They will tell you that you can’t beat the market because you aren’t a “professional” or “expert” like them.
Because of this, they will diversify your money into mutual funds and continue to diversify as many times as they can.
Yet they do this mostly because many brokers get paid every time they buy investments for you, which means they would want to do this as often as possible.
‘They can beat the market’
Even though they told you that you can’t beat the market, they can. Though might be true, but this is not actually their goal with your money.
What they care about is getting more clients because more clients means more money under management for them. If they make 1% off of capital invested they want to be managing as much money as possible, which is understandable.
What this means for you is, they don’t care how much of a return you are getting because they are playing the numbers game for themselves.
‘Asset allocation is king’
They want you to believe that allocating your assets across as many companies as possible is the best way for you to reach your goals.
They aren’t actually looking at individual companies they think are good investments for you. Rather, they are just dumping your money into mutual funds and letting your money pull in often modest gains, at best.
The only way asset allocation would really work would be for someone with large amounts of money to invest. We are talking millions of dollars.
For most people, this isn’t the case, and thus it will leave you seeing minimal gains over the long-term.