How To Tell If You Are Getting Advice Or A Sales Pitch

March 31, 2015

I recently spoke with a friend who has been talking to advisors about retirement planning. Since I am always curious about the client-advisor experience, I asked her what she was told. After hearing her, I told her that she was not getting advice. She was getting a sales pitch.

She asked me how I knew and I realized in addition to telling my friend how to choose an advisor, I also had to help her distinguish between true advice and a sales pitch. Advisors are taught (well) for years how to do this so it is seamless. But there are a few ways you can find holes.

80/20 Rule of Communication

If someone is really offering you advice, you should initially be doing most of the talking. Why? How can someone who knows nothing about you give you advice? You are more than your net worth and an advisor should take the time to get to know what is really important to you.

I had friends that were people of faith who gave generously to their church and they went to an advisor for advice. After doing 90% of the talking and having them complete a net worth questionnaire, she advised them to use the money they were giving to their church to fund the recommendations she had given them. Had she taken the time to get to know them, she would have understood that giving to their church is important to them and something that they were not going to stop. So how much talking are you doing verses your advisor?

Connection

Any advice given should be connected to your goals and what you said was important to you. If you find that you feel like you are going in direction A and your advisor is going in direction B, pause and see if they are working off your agenda or theirs. My same friends wanted to retire at 45. Although they knew that it was unrealistic, they noted that at no time did the advisor attempt to address their goals.

Instead, the advisor did a “gap analysis” to show them the holes in a plan and attempted to fill them without taking my friends’ goals under consideration. If what you are being recommended does not match why you came there, do not get swayed. Leave. There are plenty of great advisors that will listen to you and provide recommendations that actually match your goals.

Why?

As simple as this sounds, you want to know why you are being recommended the product or service. I have heard so many people tell me that since they did not understand investments, that they felt they would not understand the reason, so they did not ask. You should always understand exactly why a recommendation is being made. If you don’t, keep asking until you do. I have found that if you still do not understand, most of the time it is not because you do not understand finances, but because the decision does not make sense.

Why Not?

If an advisor recommends against something you are interested in, get a good reason why not. My friends were very interested in buying a no load investment. When they asked their advisor, they were told that no load=no help and that it was a bad idea. Initially, that may sound like a reason, but it is not. It turns out that the advisor could not sell no load funds and instead of disclosing the fact, used the no load=no help line to seamlessly move them into the investments her firm could actually sell.

Trash Talking

Let’s be honest. Any model that has someone getting cash for something has a potential for a conflict of interest so if your advisor is bashing other advisors because of their compensation model walk away. Also, there are wonderful as well as bad advisors at every firm. If the advisor you are talking to trashes another firm, walk away. The conversation should be focused on you, not making themselves look good by trashing others.

The next time you talk to an advisor, ask yourself these questions. How much of the initial talking did you do? Was their advice connected to your goals? If they didn’t want to recommend something you were interested in, why not? Did they trash talk the competition? If you don’t like the answers, you may be getting a sales pitch and buyer beware.