4 Lies Financial Advisors Tell Clients

financial advisor

Let’s face it, every one lies. It may be a small lie like telling someone you are great even though you are having a horrible day. Or something bigger like telling your wife you had to stay late at work when in fact you were out with some friends. People will always find a reason to lie whether it is to avoid small talk or to have some time to themselves, but if there’s anyone you don’t want to hear a lie from, it’s the one person responsible for your money—your financial advisor.

You may be wondering, ‘why would somebody who is meant to help me, actually be lying to me?’ Well to start with, financial advisors want your business. They will fudge information, omit important terms, and lie to convince you to hire them. They are marketing themselves to you as well as proving to themselves that they are indeed successful. And once their lies deceive you into taking them on, you may find yourself falling into another trap.

Monetary gain is the highest motivator for financial advisors to lie to their clients. When seeking a new financial advisor, it is always important to interview several different candidates and choose which one whom you feel comfortable with, and who best suits your needs. Ask them, “what is in this for you?” and really listen to their response. Don’t let them trick you with these 4 lies financial advisors tell clients.

1. Predicting the Market

Always be wary of the phrase, “We expect the market to…” Nobody, even if they claim to be an expert—which is impossible—can predict how the market will fluctuate. If a financial advisor you are interviewing guarantees a certain percentage return on an investment, immediately drop him off of your list of possible candidates. Rather than guarantee anything, financial advisors should assess the risks you want to take and prepare a defensive strategy in the event that the market takes a negative turn. Your financial plan should be based on unpredictability rather than what he or she “thinks” is going to happen.

2. Fees, Commission or Percentage

It is always important when interviewing financial advisors to ask how that advisor is paid. There are three general ways: based on an hourly or flat rate, based on a percentage of the portfolio value, or commissions paid per transaction. Which ever you decide is best for you and your money, be careful of those financial advisors who claim their payment option is the best. Those financial advisors working for commission are less likely to suggest you liquidate even if it is necessary because he or she will not want their commission to shrink. Others working for commission are more likely to increase the amount of trades so they can benefit from the added commission. On the other hand, those working for fees based on an hourly rate may want to bill more hours and suggest unnecessary work to make it seem like those hours are needed. And those working for a percentage of your portfolio may want to gain control of all of your money to make more money for themselves, but they may not be qualified or the best option.

3. Omission of Surrender Charge

Financial Advisors are known to omit if there is a surrender charge on any investment you may be purchasing. A surrender charge essentially means you must hold on to an investment for a certain amount of specified years before you may sell it and walk away. If you don’t sit on that investment long enough and try to sell it, you will incur a charge for selling it early, hence the name surrender charge. For an example, let’s say you bought a fixed annuity. If you were to sell it within a few years of purchasing it, you would be forced to surrender the interest you have earned on it. Make sure before purchasing anything that you ask your advisor if there is a surrender charge. And always remember, if something sounds too good to be true, ask for it in written form.

4. Be Careful With Big Companies

I am not saying you can’t choose a financial advisor from a big company. Go for it, but be careful. The advisor may be inclined to sell you the company’s mutual funds as the majority of your portfolio even if the fund’s performance is terrible and has a bad track record. Check your statement and make sure your portfolio is made up with funds from outside the company as well.


  1. Boy howdy, this is so true. It really matters that you ask allot of questions and your advise is a great place to start. That way there are much fewer surprises. :)

  2. Good advice Mary.

    What happened with the sub prime mess is a great example of how customers were duped. Banks knowingly sold mortgages to customers they knew could not afford them.

    And now with the market being flooded by financial products so complicated even the ones who invented them don’t fully understand them, you really have to be careful.

    By the way, as you know, US banks are now again peddling loans to poor Americans knowing they can not afford them.

  3. Agree with you Mary.

    Did you know that one financial product they are peddling heavily at the moment is Subprime Car Loan Securities? In other words, here we go again:-) And the new subprime product is extremely popular…

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