Let’s say you have a family of four and you walk into a Chevrolet dealership and say, “I need transportation for my family.” They could sell you two souped-up Corvettes. They might say, “Hey, you have four people. Mom and Dad could each drive one car, and you can put one kid with each of you in the other passenger seat.”
Technically, that option meets the suitability standard because it does provide transportation for four people. However, it is not the option that is in the best interest of your family of four. A much more logical, less expensive, and safer option for the family is an SUV or a minivan. That would be in the family’s best interest. If the Chevrolet dealer operated under a suitability standard, they could sell you the Corvettes and make a lot of money because technically the two- Corvette option meets the suitability standards for transportation for a family of four.
Beware of Financial Planners Representing Financial Institutions
Unfortunately, this is the reality too many individuals encounter with “financial planners” who represent various financial institutions. Smart, hard-working, responsible individuals who want to prepare for their financial future become financially imprisoned because of biased strategies that do not have their best financial interest in mind. Perhaps these planners offer products or strategies that could be considered “technically” suitable, but they are likely not the best option for your specific situation.
Consider the Source of the Information
Take a moment to consider where your financial advice is coming from. Who are you listening to? Who is supposed to be advising you?
To illustrate this, let’s talk about Bob who owns a butcher shop in your neighborhood. You’ve known Bob for years, and you consider him a friend. You walk into his shop, and Bob smiles, says hello, and asks about your kids. He asks you how he can help you today, and you say, “Hey, Bob, I am so tired of planning our meals; can you help me figure out our dinner menu for next week?”
Eager to help, Bob suggests that on Monday you should have the nice veal he just got in. Tuesday you should have chicken. Wednesday would be good for a rib roast. Thursday should be pork chop night, and for Friday, he has a very beautiful sirloin that would be a big hit with the family.
What is Bob not going to suggest for dinner? Bob is not going to tell you to eat more fish and leafy vegetables. He’s not going to send you down to the farmer’s market for fresh fruit. He’s not going to say, “Cut back your red meat intake. It’s really not good for you to eat too much of what I sell.” Wait a minute, I thought Bob was your friend. Why is he giving you bad advice? Because Bob is a butcher. His business is selling meat. He makes his money by selling meat. He is looking out for his best interest, not yours.
It’s not just Bob. If you go to the Toyota dealership and ask, “What’s the best car for me?” they will show you the top-of-the-line Toyota on the lot. Go to a Cadillac dealership, and they will recommend that you buy a Cadillac. Bob the butcher, the Cadillac dealer, and the Toyota dealer are businesspeople. They are not required to look out for your best interest.
Financial Planner Does Not Mean Financial Fiduciary
The problem is that 90 percent of Americans think that their financial planner is a fiduciary when they’re not. When you go into the bank and ask them what to invest in, they are likely going to sell you whatever investment products they have that make them the most money. That is their business model. They’re not necessarily going to do what’s in your best interest because they are not required to. That’s the case for any financial institution from banks to brokerage firms.
Find Trustworthy, Fiduciary Financial Experts to Manage Your Money
Ultimately, these biased products, solutions, and strategies are built to profit them and imprison your finances. That’s why you need a nutritionist, unlike Bob, who considers the importance of all food groups and a balanced approach; why you need an impartial car guru who knows the top cars across all brands that would best meet your specific needs. It’s why you need a fiduciary financial advisor who can help you invest like the wealthy and plan with the expertise you want and the industry objectivity you need.