Hi, my name is Bob Brooks and you're watching the prudent money channel. I wanted to share a question that I got that came in that I think it was really interesting question had to do with financial advisors says dear Bob, I'm looking for a financial planner. There are a lot of things to consider. In fact, I've watched your teaching course on selecting a financial advisor. If you had to narrow it down to one quality as being the most important quality, what would it be? I love this question.

And if you watched my my teaching video on selecting a financial planner, in fact, I talked more about how to trust one. If you watch that, you would see that there's a lot of things to consider. And so narrowing it that you can narrow it down to one thing, and it comes down to this the fiduciary standard and this is the highest standard of care between an advisor and a client, which states that the advisor has the legal and ethical duty to remove Conflicts of interest in placing the client's interests ahead of their own. Now, you may be thinking, Well, isn't that what advisors do? Don't they place the client's interests ahead of their own? Nope, not always.

And it's because of a couple reasons. First of all, in a commission driven situation, there could be three products that an advisor wants to recommend for his first client. One plays a higher Commission and the other and this one pays a higher commission the other and what ends up happening is that that advisor can look at that higher paying commission and rationalize in his or her own mind, that's the way to go and recommend that when that may not be in the best interest of the client, but it was more in the financially best interest of the advisor. There's a lot of conflicts of interest and we'll I'll show this and explain this to you. So how do you know if an advisor is going is a true fiduciary? When it comes right down to it?

I mean, how do you even know because that's something you don't realize for years through a lot of Different transactions do a lot of a lot of dealings with that advisor. It's so tough to know and it comes down to this. And this is the, this is a phrase that I coined called a contrarian decision maker. Now walk through this with me this is someone who basis decisions on both sides by removing all biases, being open to all aspects of the decisions and own their beliefs rather than rent them. We've talked about that concept of belief, belief renting, on other on other teaching courses. But this let's unpack this definition because I think you'll start to understand what I'm talking about someone who bases decisions on both sides by removing all biases.

Now as a financial advisor, I will admit I have I have biases, I have a bias towards the fact that I think fee based money management works the best. I have a bias towards fee based consulting removes the conflicts of interest, and that the Commission's can create now I can sit in front of some Somebody and talk to them about my fee based money management program. And I could realize that for this just is not a fit, this is not going to work out well, they need to be talking to a different type of advisor that would be putting their interest ahead of mine. Now if I put my interest ahead of them, I would do everything I could to talk them into that can try to convince them that this was the best thing for them when it really isn't. So that's the first one removing all biases being open to all aspects of decisions.

Now, this is important because this means that as the advisor, I'm going to look at every available option, not just two or three different things, I'm going to make sure that I've vetted out every possible option alternative and coming up with the best type of plan even going against the mainstream into and recommending something that mainstream says oh, that's no way that would ever work. But I see it as the best interest and then owns their beliefs rather than rent and this is very good. Let me kind of review what I mean by that, if you haven't seen that video, you know, a lot of times we go and we'll listen to somebody speak about money about finances, investments, whatever it is, and they'll say something, and you'll go, you know, that makes sense. I think I'm gonna, you know, kind of psychologically, subconsciously, you adopt that belief for your own.

So you, you rent it. And the reason you're renting that belief is B, simply because you don't know what it means. But it sure does sound good. And if someone asks you, what do you think about, say XYZ stock? And then you spout off what you heard? They'll go, Oh, that makes sense.

And but if so why do you believe that way? You would go I don't really know. But you know, the speaker said something about it. And it really sounded made sense to me. So it's important that and there's a lot of belief reading going on. There's a lot of a lot of information that comes down from I'll give you a good example like for mutual fund companies to two advisors saying this fund is great.

Let me tell you why this fun works, what's different about it, and they take that at face value, then they regurgitate that to their clients. It's not really understanding a contrary and decision maker says, Well, let me look at this and figure out why this isn't true. I mean, they really vet it out. They understand the pros and the cons, and why it might not work. I was talking to my doctor not too long ago, had a physical and he said, we were talking about he said, the ultimate contrarian decision maker. And he says to me, he goes, you know, drug reps don't like me too much, because I start asking too many questions.

And I make them back up their theories and make sure that they know what they're talking about. This is the same thing that you look at all aspects of a decision because here's why the decision part of this is so very important. In the fiduciary standard, you are relying on an advisor relationship to help you make decisions on something that you know little about. That's what it comes down to. And so if you're placing your trust into them to be a fiduciary, you want to make sure that they're making good decisions when they come to you with a recommendation. So this is what you're looking for.

This is something that you can spot, pretty, pretty much up front, if they are this contrarian decision maker. long term success with money is determined by the effectiveness of an individual's ability to make prudent decisions. I so believe this, and I've seen this and what we, you know, kind of with money, what I think we are maybe a country of bad decision makers, we haven't honed the skill, it's a skill set, that I would encourage anybody to really work. I mean, there's volumes books written on about how to make effective decisions, but learning this skill sets extremely important. But here's some key attributes of a contrarian decision maker First of all, plays places a high value on research, if you're going to be able to look at the pros and cons of every financial situation, every product, you're gonna have to do a lot of research, you're going to have to do a lot of research into new and upcoming investments that are there, they're coming out and there's always different types of investments being brought out to the marketplace.

So You're gonna be doing research all the time, and learning and understanding that you place a high value on research. The second one is doesn't exclusively rely on third parties that ask for answers. This is belief renting. I see this all the time with these big brokerage companies is they have research departments, they send out these flyers, and they This is why you should invest in XYZ. Take this to your clients. And now you got to remember, they're they come to they come to maybe some of those conclusions with a little bit of bias.

And now you're transferring that bias to your clients. And they got a key key attribute of a concern decision makers, they don't do that they don't rely on third parties. Now the third one, you are getting the best advice for the fees or commissions you're paying. You've always got to you have to assess the value especially I think if you're if you're paying a fee, for instance, they're not getting much value. If you're paying an investment management fee, excuse me to someone that is managing money for you're not doing anything They're being passive. They're not actively managing, but you're still paying a fee, you always have to feel confident that you are getting value for the fee.

And the fourth one, they make it a priority to explain pros and cons before rendering a verdict. Now, the contrarian decision maker is going to sit down and say, Look, here's the universe of things that you can do. These are the steps that you can take, these are the strategies you can undertake. And this is the pros and cons of various ones. And this is why I settled in on this one because why I think this makes sense. So you know, they vetted everything.

And they're not just cherry picking a strategy or cherry picking a product to to recommend the decide to recommend to you now examples of scenarios that could have bias. I've talked about this an advisor who relies on company on a company research team. You see, this is the big brokerage houses. We talked about how you know that their transom was kind of a transference of bias from their research team that you're transferring to your client account. advisor now what I mean by that is an advisor who works for a company, and all that they can provide are those company products. So it could be insurance, it could be a new ities, it could be a mutual fund company.

But it all revolved that's all there there captured by that company to give you those products. Now, there's nothing wrong with a captured advisor. And some of these capture advisors have good products. What you have to do, though, it's impossible for them to to look beyond obviously what they have to offer. So you have to maybe talk to other advisors, and kind of compare and contrast. And then then of course, there's the commission versus fees.

Now, my, my bias, as I said, is that I think that that being on the Fie side of the advisor world eliminates a lot of conflicts of interest, the only conflict of interest that could be there is that they're charging too much fees. So if you're charging too too high of a fee structure, that fee structure may not be in the best interest once again, of the client and that can that can fall on the fee side. On the commission side, you know, one of the problems with the market today is that you have all these investment products and you have different commission fee structures, they're not level. So that can create a conflict of interest incentive programs. To me, I can't believe these are still around back when in the 90s, there was tons of incentive programs. And basically it was, if you sell from our mutual fund company, you'll get this additional benefit that can create conflicts of interest that is still occurring today.

You still see insurance companies giving away free trips, because you invested in a particular particular product. And you've got insurance wholesalers that are pushing these products, it can cause a conflict of interest. And then there's the sales litmus test the pressuring techniques. You know, I talked about this, that if you are you're working with an advisor who is just hammering on you about buying something who's pressuring you, they don't have your best interests at heart. Nobody can convince me that they have your best interest. To start, so that's that's something that's a big red flag anyway, they should respect the way that you make decisions.

That is somebody who is operating under fiduciary standard, and then recommending parallel shifts. Now what I mean by that is that you're an XYZ mutual fund, and your advisor calls you up and says, Hey, listen, I think that we ought to get a get away from XYZ, fine, we should sell it and we should go into ABC fund. And you look at the funds, and of course, they're going to earn a new commission. And the question that should come out of your commission that you should direct at them is now what's the value created for me going from this fun to this fun? And because they are recommending something that creates a commission may not be in your best interest? So here's the questions to ask.

And this is what I love about these questions, is the fact that these are questions people typically ask in the advisor process of selecting one and the first one is how do you go about making decisions? This is it. Interesting question and one that that people that don't really have a decision making process are going to, they're going to struggle with. You want someone to tell you how they go through the process, they go through the decision making process, how they come down to a recommendation, they should be able to be very detailed. I think it's a little bit of a red flag if they're not, what amount of time do you spend researching for future recommendations? As I said, they should, if they're passionate about researching, they should be able to go through their methodology, what they look at, what they consider how they vet out products.

And the next one's Give me an example of a time where your recommendation didn't reflect pop culture, finance, or in other words, the mainstream. I gotta tell you, I want someone who thinks out of the box I want someone who thinks who's not scared to think differently than the mainstream. And if they can't answer this, I think so. Well, you know, one time I went against conventional wisdom fact I do it all the time. That's the kind of individual that I want. That's a contrary and at heart as someone who's thinks differently than the mainstream.

And you want to see a good example of that. Finally, what is different about you and your practice than from the mainstream? Very important question. And if they are different from the buy and hold XYZ fund, traditional investment strategy, they're going to tell you and they're going to be very passionate about it. And so you can tell that they that they are different from the mainstream. Now, I don't want to I don't want to suggest that, that there's a that all advisors who practice mainstream financial planning and investing are not operating under a fiduciary standard.

It's just a something that you want to know. So it comes down to trust, and you got to be able to trust that they are following a fiduciary standard putting your interest first. And that you can tell that once again by how they make decisions. It's a very key skill set. And you got to remember if here's the bottom line with it, is that you're going to somebody and break it down. Look at this way.

You're going some data to somebody to help you make decisions. You want to make sure that they are a good decision maker and have your best interest at heart.