Oh, it's not what you're thinking. The F word I'm thinking about is fiduciary, meaning that your financial advisor is required to put your best interests as the client first, no matter what.
That might seems obvious, but according to a survey by Bloomberg Business, the majority of Americans mistakenly believe that insurance agents, stockbrokers and people calling themselves financial advisors are fiduciaries.http://www.tinyurl.com/2777xyl
The survey showed that thirty-four percent of investors believe that financial advice is the primary service offered by stockbrokers, even though their main job is to buy and sell stocks. The 'advice' is free; the broker's payback is the commission on the trade he/she makes for you.
Ninety-three percent of respondents said brokers should be required to disclose conflicts of interests in advance, such as cash payments or vacation trips they would receive from a mutual-fund company in exchange for selling its product. Should be required? Do investors ever think about or ask if a conflict of interest exists?
Sixty percent of respondents said they thought insurance agents had to uphold a fiduciary duty. Alas, not true. They are required to explain the policy they are selling, not point out the hidden costs. Who can blame agents for wanting to sell an annuity when the up front commission rate is 18%?
The SEC (Securities and Exchange Commission) may take up the full disclosure issue this year for everyone selling financial products or advice. On the other hand, they may not. They've been planning to do that for many years. Just never got around to it.
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