Frog in a pot, or why am I still with a wirehouse?

Financial Advisor is a term that covers a whole range of people in the retail finance space.  There are few criteria for the title – no educational requirement, no experience requirements, virtually no ethical requirements.  Depending on where you live, you might have to register.  It is just a title that covers both highly ethical Fee-Only Advisors and Annuity Sales folks….and everything in between.   It is no wonder there is confusion about who has whose best interests in mind when making financial recommendations.

But how do people end up in this situation?  If you ask them, they will state they want a Financial  Advisor that always puts their financial interests first.  Explain the difference between the Suitability Standard and the Fiduciary Standard, and they will choose the Fiduciary Standard  almost all the time.  So, how did they get into this sub-optimal place?

My thought is that they are like the proverbial frog in a pot of boiling water.  You know the story…..put a frog in a pot of water and heat it up and they do not notice the rising temperature, but throw a frog in a pot of boiling water and they will hop out immediately to save themselves.  The point is you are often not aware of a slowly growing menace.

In the retail finance world, the seduction starts early……..you roll into your local bank branch with some new found wealth and ask for some help.  The conservative architecture, people in suits – all lead you to believe you will be helped and not sold a product paying someone a high commission.  Besides, this is early in your investing career, the amount is small, the bank may not be the best place – but at least it is a start,   you’ll fix any issues later.  etc. etc.  The seduction is almost complete…..just a add a couple of kids, busy lifestyle, and before you know it, you have been at a wirehouse for 20 years getting so-so advice and probably paying high fees.  So what to do?  Who wants the added hassle of changing Financial Advisors?  The guy/gal is nice enough in person, and it will not be fun giving out the bad news that you need to move on.

True, it is not pleasant having to deliver bad news when changing advisors.  However, you owe it to yourself to right the mistakes of the past.  Realize you have been a frog in a pot and need to make a jump to the place you have wanted to be all along.  It may be a little unpleasant as you execute, but you will be far happier (and wealthier) in the long run. In the frog parable,………the boiling water kills the frog.