Follow the Incentives: Might Your Investment Planner or Financial Advisor Be a Fund Salesperson in Disguise?

by Chris W. Rea on

I’m a software developer by trade. When I visit LinkedIn, the “professional” social network, many of the jobs I see advertised to me as “recommended jobs” are technology jobs — but not always.

This morning, a recommended job for an “Investment Retirement Planner” caught my eye. The recommendation might have been informed by my profile’s mention of retirement planning software. While I’m not interested in leaving software, I wanted to see what this “Investment Retirement Planner” job was about, so I clicked through.

I’ll boil down the essentials. This permanent job was posted by a large Canadian financial institution. The job category was listed as “Financial Consultant / Investment Advisor”. i.e. to advise clients about their finances and investments.

Sadly, I wasn’t surprised to see the real truth about this job, captured in the following:

Pay Type: Commissioned Sales

… and under Key Accountabilities:

[…] drive investment sales and new client acquisition […]
[…] you will be provided with superior tools to consolidate clients’ business […]

… and then:

  • Unlimited earning potential through commissions
  • Bonuses tied to your sales production […]

There was more detail with respect to required credentials and other skills, including a token mention of “passion for putting clients first”, but the essential problem is: Would you trust the advice provided by an “advisor” whose compensation is directly tied to how much and what kind of investment products they sell to you?

I’d be concerned the incentive scheme and accountabilities encourage placing “consolidated” client assets into higher-commission and possibly unsuitable products. Higher commission products involve higher fees, and higher fees impose a drag on investment performance.

Sadly, the general state of the financial advice industry in Canada and elsewhere is that most “financial advisors” you might deal with — even those with extensive credentials and designations — are at risk of being more interested in pushing product than offering quality, trustworthy, appropriate advice. Part of this problem is that most people expect to get their financial advice without paying an explicit, up-front fee.

Could your “financial advisor” be a commissioned fund salesperson in disguise? Ask key questions of any financial advisor you may deal with. Understand the incentives in order to ensure your interests come first.

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