Trusting a stranger with your money can be hair-pulling. There are many people who claim to be able to manage your wealth and your debt. They come from many different places. Let’s take quick glance on where they are from:
- Banks: They come with an array of products that touches of course banking, credit and lastly investments.
- Insurance brokers: They sell mostly…insurance. They sometimes offer products from other banks as part of their offer.
- Financial advisors (mutual funds reps): They sell all sorts of mutual funds, and like the insurance brokers, they sometimes offer other types of financial products.
- Fee-based advisors: They provide professional services, personal advice and assessment on your current financial situation. It varies from estate planning, to other services.
Usually banks, insurance brokers and mutual funds reps are commission driven, which means that they are mostly salespeople. The products that they offer come with incentives, such as higher paid fees or contests for quantity sold and such. These perks can create aggressive behaviours in those salesmen and women. Banks have quotas to fill and commission has to be earned, which can also create a pressure environment.
Mutual funds and Insurance brokers have to follow certain guidelines, which can be vague and hazy. Since regulators are not quite present, a lawsuit and a lot of complaining are necessary to resolve any issue.
Fee-based advisors are much costlier than both previous, since they are not making money off any products sold. Depending on your current situation, some of these advice can be non-useful, especially if you are in the low figures (low or negative net worth). In this case, you are better off doing your own research.
Part II will help determine the good side for these available choices.