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Are Financial Advisers Failing the 99%?

As somebody who is in the financial advising field, I’m getting a little tired of hearing that all financial advisers are duping their clients out of a lot of money but what I’m far more tired of is the fact that in way too many cases, it’s true. You may have heard about the Goldman Sachs employee [3] who quit by writing this op ed in the New York Times. To sum it up, he was tired of advisers being more concerned about profits than they were about doing what is best for their clients. Maybe the most embarrassing part was his claim that Goldman employees refer to their clients as “Muppets.”

Then there’s this article [4] that spoke of a study where actors were hired to pose as average customers with one of four different types of portfolios. They visited 300 Boston area advisers and the large majority of advisers changed their portfolios to more fee laden options. Seriously?

My Other Pet Peeve

Along with the issues above, my other pet peeve is that the average American has no access to quality, non-biased financial advisers. The 99% can find one of those advisers in the Boston survey above because they’ll be quick to sell you a fee-heavy mutual fund, annuity, or life insurance policy but what about the advisers that don’t receive commissions? These fee only advisers can’t make a living on small accounts so often they won’t even talk to you over the phone unless you have a $100,000 or more to invest.

The average working American needs help with their investments. Just this past weekend I spent some time with family members and some of their friends. After I told them what I did and offered to look at one person’s 401(k), that turned in to looking at and adjusting 7 people’s retirement accounts.

They were in fee heavy actively managed funds when they should have been predominantly in low fee index funds. Their 401(k) was bleeding money away in fees not because they chose to do it that way but because it was one of the prebuilt options that their employer recommended. That, I believe, is a crime.

I see this every day and it bothers me. Average Americans need help and there should be advisers working with those people. That’s what I do with my practice and I’m looking to expand that offering. I believe that if advisers provide an affordable option to middle class Americans, they would gladly accept the help and that’s what I’m out to prove.

The Numbers

I’m currently conducting a survey [5] to see if my theory is correct and here’s what I’ve found so far. As of the time of this writing, 81% of Americans are worried that they won’t have enough money for retirement, 78% of middle class Americans don’t have a financial adviser, 88% report little or no investment knowledge, and 82% claim that they have little or no confidence in their ability to pick the right mutual funds for their 401(k). If that doesn’t sound like a whole lot of people who desperately need the help of stand-up, ethical financial advisers, I don’t know what does.

And here’s the second part of the survey, 63% said that having an unbiased professional help them with their 401(k) would be extremely or highly beneficial and another 23% said it would be moderately beneficial. We have to do something about this problem. One out of every four [6] people is postponing retirement because they don’t have enough savings. We as advisers can’t let this happen. People work hard and sacrifice time with their family throughout their working life. They should be able to make up for that time once they retire.

The financial advising community has failed and we have to change that. Sure, Americans have to take responsibility by saving more but financial advisers have to stop worrying about fees and start seeing themselves as financial physicians who have an obligation to help everybody.

Will You Help?

I’m putting my money where my mouth is. I want to make more of a commitment to middle class Americans who need help but I’m not yet sure how to do it. Would you click here [5] to take a 5 minute, anonymous survey that would help me develop this business model? Not only do I plan to use the results of this survey for my own practice but I hope to continue writing about it to raise awareness. Your help would be greatly appreciated.

Am I wrong? What’s your take on this topic? How is the advising community failing the middle class and what do you need from the financial advising community. There’s no shame in not knowing enough about your 401(k). I probably don’t know enough about what you do for a living. Let me know how financial advisers can help people of all income levels.