Tags: Sanford | advisers | invest | fees

Sag Harbor's Sanford: Watch Out for Unethical Financial Advisers

By    |   Friday, 20 June 2014 10:44 AM

A fair amount has been written about how financial advisers lighten the wallets of their clients with fees, but many of us likely don't know the half of it, says James Sanford, founder of financial advisory firm Sag Harbor Advisors.

"Most investors know their financial advisers take a percentage for managing their portfolios, but they probably didn't know the mutual fund industry is also giving these advisers commission for pushing specific equity mutual funds," he writes on CNBC.

"I'm not talking about front-end load fees. I'm referring to commissions and bonuses that financial planners get after they put their clients into these funds."

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

While the Securities and Exchange Commission calls these fees commissions, these boil down to kickbacks, Sanford says. They reward financial planners for guiding their clients into funds that may not be in the clients' best interest.

Sanford recommends asking the following questions to your financial adviser to determine whether they are receiving additional payment from equity mutual funds.
  • "What commission did you earn on the stock [funds] you sold me?" Even if your adviser didn't receive a commission, they might have earned a mark-up or you might pay any spread.
  • "Would you be willing to show me where your money is invested?" If your adviser is in the same investment strategy as you are, then he truly believes in that investment strategy.
  • "Would you be willing to get paid only if my portfolio makes money?" This fee structure "shakes the current system and forces financial advisers to perform, but it is one of the best ways to keep your financial planner honest and transparent."

"It's so important to educate yourself as an investor to make sure your financial adviser is putting your needs ahead of his," Sanford notes

The Wall Street Journal offers several tips to people looking for a financial adviser:
  • "Look for a financial adviser who is a certified financial planner (CFP).
  • "Consider the planner's pay structure. A planner who earns money based on commission rather than a flat . . . rate could have an incentive to steer you in a particular direction.
  • "Read the code of ethics that your financial planner adheres to."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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A fair amount has been written about how financial advisers lighten the wallets of their clients with fees, but many of us likely don't know the half of it, says James Sanford, founder of financial advisory firm Sag Harbor Advisors.
Sanford, advisers, invest, fees
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2014-44-20
Friday, 20 June 2014 10:44 AM
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