Financial advisors are all the same – they want your money! Right? What if that’s wrong? Join us in discussion with financial expert Pam Krueger who has some info to share about fiduciary advisors. Enjoy the show!

 

Margaret Manning:

My guest today is financial and investment expert Pam Krueger. Pam is also an author and a co-host of the PBS show MoneyTrack. She has a very interesting website called WealthRamp, where you can go and match your own needs as a consumer with a fiduciary advisor. I want to welcome you, Pam.

Pam Krueger:

Thanks, Margaret. I love being here.

Margaret:

I love having you on the show because you are so down-to-earth. I think our women really appreciate that as well.

Pam:

We’re all in the same boat.

Margaret:

Totally. So, today’s topic has to do with fiduciary advisors. What are they, and which rule pertaining to them has changed? How is that going to impact people?

Pam:

Increasingly, whenever you hear the term “financial advisor,” you’re going to hear it in the same sentence with the term “fiduciary.” Fiduciary just means taking full responsibility for the financial advice that you’re giving, and legally, you can be sued if you mislead your clients in their financial decisions.

This is a hot topic right now because 90% of the people who call themselves “financial advisors” actually are salespeople who work for brokerage firms or insurance companies. They don’t work for you so don’t kid yourself.

It doesn’t mean they’re bad people but you’ve got to be real about the fact that they don’t work for you. They work for the brokerage firm.

Margaret:

Yes, they get commissions on what they sell you.

Pam:

It’s not just that they get commissions. They work for the company they represent, which means that their best interest is for the company, not for you. Legally, brokerage firms and insurance companies sell products, so they can’t be fiduciary, and their advisors aren’t fiduciaries.

Many people got hit in the past 10–20 years because of brokers selling products online, and that’s why the term fiduciary keeps popping up.

Now people know, if 90% of all advisors are just salespeople working for brokerage firms and insurance companies, then that means there’s only 10% of those who call themselves advisors, who are really fiduciary and work independently from those companies.

They don’t have their name attached to a big company, and the SEC, the regulator, holds those independent advisory firms to a higher standard. All of this means that when you’re working with a fiduciary advisor, they’re legally required to put your best interest first.

Margaret:

Pam, how are they paid?

Pam:

Fiduciary advisors, overall, are either fee-based or fee-only. When they’re fee-based, it means that legally, they can still get some commissions from products, even though they don’t work at the big companies, in addition to the fees they get for the advice they’re giving you. My definition of fiduciary is fee-only.

Margaret:

Okay, so now that we know what fiduciary advisors are, tell us about the rule that’s changed pertaining to them.

Pam:

What I just described to you is the overall financial services industry. Like I said, it’s divided into 90% of salespeople who don’t care about your best interest vs. 10% of independent fiduciary advisors who are legally held to a higher standard.

But when you actually consider the financial services industry, it might strike you as weird that unlike doctors and lawyers, who have to have a certain level of education and competence, pass their exams and take certain oaths, it’s not so with financial advisors.

Wouldn’t you say though that money is every bit as important to our well-being as health, property and so forth? This is money we’re talking about, and yes, in today’s world, it’s not something you can go without.

But, financial services belong to an industry, not a profession, and because of that, we end up with a mixture of low-quality insurance agents and high-quality fiduciary advisors, all in the same bowl.

A few years back, The Department of Labor wanted to make all financial advisors fiduciary, so they’re legally obligated to have your best interest first. In the era of the current administration and anti-regulation, though, this rule was axed. Even though it was almost fully instituted in 2018, the Federal Court struck it down.

Margaret:

So, the rule was just a recommendation that never actually existed?

Pam:

No, it was already being implemented, but it was rolled back in June of 2018. So, a lot of people came to me, asking, “What do I do now?”

The good news is, even though the fiduciary rule didn’t pass, the fiduciary standard is still in place. Those 10% of advisors I mentioned in the beginning are already voluntarily choosing to be independent and adhere to the higher fiduciary best interest standard.

That means that 10% of the advisors out there are willing and happy to sign a fiduciary oath, put it in writing and execute it on your behalf. All you have to do now is find a one such advisor who will be a good match for you.

Before you make your choice though, you have to look at some things, like: Are they competent? How are they practicing their business? Are they actively keeping up with the latest software? Are they really proactive?

My job in vetting advisors for WealthRamp is not only to screen away than 90% who cannot qualify because they’re not fiduciaries. I also have to clean away half of that 10% and only keep the ones who can meet my three requirements: competency, fiduciary, and the X-Factor – which is how I refer to really high-qualified advisors.

Margaret:

You’re really providing a great service. Do you charge consumers for this service when they fill in the form? How does somebody engage with you?

Pam:

Let me be fully transparent here. The consumer doesn’t pay any fee at all – in any way, shape, or form. The advisor pays me the fee as a referral fee, just like if I’m a CPA, or an attorney. Because I am a registered investment advisor, the fiduciary can professionally share part of their fee with me.

Also, the fee they get paid by the consumer cannot be bumped up to cover my fee. That’s in our contract. So, I’m helping the advisors meet clients, but I want to keep the service free to consumers because I want to help people who may not have a lot of money meet the right advisor.

But, if you’re an advisor, you cannot pay me to be included on my platform. I’ve been asked, “How much can I pay you to be on your platform?” The answer is, “You can’t.” I’m only as good as my worst advisor, so I have to diligently screen everyone and make sure they’re all at a very high standard.

Margaret:

So, you’re really saying that there’s a way for women to protect themselves from getting bad advice and getting involved in a situation where the advisor does not have their best in at heart. Of course, like you said, non-fiduciaries aren’t bad people, they just have a job and their loyalty is to the company they work for.

Pam:

I did it too when I was 24. That’s how I started in the business. I wasn’t old enough to rent a car, but somehow, I was supposed to be old enough to give a 65-year-old woman advice on how to invest a million dollars. Quite silly, isn’t it?

Margaret:

True, but you’ve now got another option for people. I really want to spend some time talking about this so you can present your platform and give us the nuts and bolts of what you’re offering.

Pam:

As a person, you are somewhere on a scale of 1 to 5 in terms of how much advice you want or don’t want. The person at the one extremity of the scale says, “I don’t want to do or know anything about my finances. I want my advisor to handle everything.” That’s not most people, but some people are like that.

Moving along that continuum, you get to the other end of the scale where a person may want to engage with an advisor, but they want to learn and be collaborative. They don’t want to be in the dark. They want to know everything that’s going on with their finances.

So, then you need to ask yourself, “Where am I on that scale of needing advice?” That’s an important consideration.

Margaret:

Don’t you think that women over 50 are all towards 5? When we have an income every week or every month, we don’t tend to care about financials so much.

As we get older, though, we are more responsible for the pennies that are coming in because they’re not an income. They’re our savings or our pension or our investments, and we want to know how they’re handled.

Pam:

Yes and no. Yes, what you’re saying is spot-on, but also no, because so many women have had a terrible experience with brokers that they associate with all financial advisors.

At 28, I was the vice president of a brokerage firm, so I know what goes on behind the curtain. I know so many women who have depended upon their husbands to take the reins in the financial room, but when they wind up in the control position, it’s overwhelming.

They clearly remember the experience they had with the ‘advisor’ and how the guy talked over their head about the stock market. It wasn’t an experience they want to repeat, and that’s the memory with which they come to me.

Most people don’t even know that the actual advisor isn’t there to sell them anything. He or she is more interested in learning about your whole financial life and collaborating with you. That’s a whole different experience that I call getting guidance and advice.

There’s a whole education that goes along with how you can interact and get the most out of an advisor relationship. You can also learn how to shop for the right advisor.

Margaret:

I’m assuming that you’ve got lots of resources on your website where people can go to get more information. Pam, thank you for being such a great advocate for people who want to handle their finances the smart way.

Pam:

Oh, I love doing it. Before we close though, let me share why I took three years of my life to build WealthRamp. On my show, MoneyTrack, I always tell our audience, which is made up of women over 55, to find a fiduciary advisor, and they always come back asking, “Well, Pam, I don’t think I can find a quality advisor on my own. So what do I do?”

And to tell you the truth, I couldn’t send them to any single place I could recommend. So, I stopped and said, “I’m going to build that place myself.” But it’s a tough job to vet all the advisors out there and select only those who are competent enough and fiduciary.

It took me three years to go through and vet only those who matched my criteria, but now we’re national.

Margaret:

You’ve done a great job. Does national mean only in the United States?

Pam:

For now, yes.

Margaret:

Do you have fiduciaries in Canada?

Pam:

Not yet because there are some very weird financial regulations between the US and Canada. You would think it would be super simple, it isn’t. Canada, the UK and Europe are in the future plans though.

Margaret:

I wanted to make that clear because although a very large percentage of our community is in the States, not everyone lives there.

Beyond the matching service you offer, your website is just a wealth of information about making good financial decisions. So it’s just actual matching to the right advisor that’s only available in the States, correct?

Pam:

Yes, that’s right. For now.

Margaret:

Soon you’re going to dominate the world of fiduciary referrals worldwide. This is so important so thank you for doing it.

Pam:

Honest to God, this has become my big mission in life. It’s so much fun.

Margaret:

If anyone can do it, Pam, I have every faith you will. We’ll get back on and chat about it in the future as things progress. Again, thank you so much for being here with us, and sharing your wisdom. We’ll talk again soon.

Pam:

Great. Thanks. Bye.

Margaret:

Bye.

What is your experience with financial advisors? Have you found someone who has your best interest at heart? Please share what you know about fiduciary advisors in your local area.

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