Fiduciary

I'm a big believer in delegation, especially when it comes to accomplishing big goals that require lots of time, expertise, and attention.  When it comes to putting together an apartment deal for example, it takes a team of experts working together towards a common goal, and a lot of my job is putting that team together.  Everybody's interests are aligned, and everybody is incentivized to make sure the deal goes through.  So, my issue with financial advisors doesn't stem from the belief that I think you should do everything yourself.

I just can't wrap my head around how someone can be considered as being in the position to be a fiduciary to their client when they only have a small basket of investment options to choose from and there is absolutely zero incentive for them to even attempt to outperform.  A lot of times they are paid a commission on the front end, then continue to collect their 1% fee to do nothing. 

It really gets under my skin because I have seen it not once, not twice, but three times happen to people who are close to me.  It goes something like this: the client takes a risk tolerance test, which spits out a suggested portfolio mix between stocks and bonds.  The advisor then puts the client's capital in the appropriate weighting based on what the test said, and they check it maybe once a year.  In two of the situations I saw with my own eyes, the advisors had their client's money heavily weighted towards equities when they were less than 2 years from retirement age. 

Now, maybe these were bad advisors.  Maybe I was just unlucky enough to know three people with three different advisors and three different companies that just weren't particularly good.  I tend to think that isn't mere coincidence, but a sign of a systemic issue that is being largely ignored.  That issue is that people automatically assume that someone with the designation of "financial advisor" with a company they've heard of before must be an expert.  The simple fact is that they don't get paid based on the positive performance of their clients' portfolios; they get paid on the front end and the rest is just gravy.  Compared to a multifamily deal that I put together, if that property doesn't perform well, I don't get paid, which would make all the time and effort I put into finding and acquiring that deal a colossal waste of time.

I'm not calling out every financial advisor and wealth manager out there.  There are some great companies out there that are full service, one stop shops when it comes to wealth management.  They look at all different investment types, and aren't bound by any corporate limitations as far as what they can invest their clients' money in.  If a client wants to buy Tesla stock, they can do that.  If a client wants some exposure to direct ownership of a commercial property, they can do that as well.  The companies that I've heard of that do this sort of thing even pay their advisors differently.  They are paid salaries that aren't influenced by how much or what products they place money in.  Sometimes, they even become partners in the investments with their clients.  In that case, the advisor has an opportunity to earn alongside their client if the investment performs well.  That is a fiduciary.