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Overcoming the Fear of Financial Advice

Last update on: Apr 21 2016

People need financial advice. People don’t trust financial advisors. That’s the unfortunate conundrum facing most Americans these days.

Americans now are responsible for much of their support during their post-career years. Employer-provided pensions and medical expense reimbursements are fading into the past. Even those who retire with those benefits should expect them to be reduced over time. Government benefit programs are in trouble and have seen cutbacks. They’ll see more. You need to save, invest and make good financial decisions to have financial security.

Yet, they don’t teach how to make good financial decisions in school. Even if they did, the constant change in the financial world would make much of that education obsolete in a few years.

So, most people need help making financial decisions. The problem is most people no longer trust financial professionals. According to a recent survey of investors ages 28 to 64:

? 60% of all investors said their greatest fear is being cheated or scammed by their financial professionals;

? About 50% of those in or near retirement said they were afraid of being cheated by their financial advisors;

? About 54% of investors says they are self-directed, compared to 29% in 2008.

Blame it on Bernie Madoff, numerous other scams, the tech stock bubble and meltdown, the financial crisis that began in 2007, the various conflict-of-interest scandals involving the big financial firms in recent years, and more.

It’s healthy to be skeptical and questioning about financial advice. But your reaction to all the financial problems of recent years shouldn’t be to “go it alone.” You need assistance and advice from people whose day jobs are to spend their time studying financial issues and applying that knowledge to your situation. You can have access to the quality advice you need without the risk of falling prey to scams, crooks, and frauds.

Take these actions.

  • Avoid firms and advisors with conflicts of interest. The major, full-service financial service firms often paid their advisors more money for selling in-house products than for selling outsiders’ investments. Those products gave the firms a higher profit margin. Even apparently independent advisors can have conflicts of interest.

You’re right to be skeptical, but you shouldn’t let news of frauds and bad advice keep you from using professional advice. Select your advisors carefully and be sure you have more than one source of information, and then you should be fine.



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