The Paladin Registry Continues to Help Consumers Find, Evaluate and Select Quality Advisors
SACRAMENTO, Calif., May 22, 2007 — Nearly all consumers err by selecting financial advisors based on marketing information from advisors that they can't properly evaluate, according to data compiled by the Paladin Registry (http://www.paladinregistry.com), a free Web-based service that provides information about advisors and documentation for credentials, ethics, and business practices.
Accepting marketing information as accurate data was one of the more common mistakes that consumers make when selecting financial planners and advisors, according to Jack Waymire, co-founder of the Registry and author of Who's Watching Your Money? (ISBN 0471476994, John Wiley & Sons, 2003).
Waymire noted that the results are based on responses from 1,285 consumers who used the Registry to replace terminated financial advisors in the first quarter of 2007.
"We asked them to tell us the mistakes they thought they made when they selected financial advisors and whether the mistakes contributed to the advisors' eventual termination," Waymire said.
More than 97 percent of respondents said they selected advisors who marketed themselves as trustworthy, investment experts. However, they did not have a process for gathering information that would help them validate the advisors' claims, compare them to each other and select the best ones.
Instead, they based their decisions on verbal information from advisors. They failed to recognize that advisors prefer verbal information because it maximizes their sales skills and is easy to deny later.
The second most common mistake – cited by 83 percent – is relying too heavily on advisor personality in the selection process. After hiring the advisors, they learned personality had nothing to do with competent, ethical advice and services.
In fact, they felt liking advisors introduced additional risk to the selection process because they tended to trust people they liked. They then let down their guard and selected advisors for the wrong reasons.
Meantime, about 82 percent of respondents said they learned about advisors from the advisors themselves. They did not have an objective third party that provided impartial information that would help them select high-quality advisors and avoid their low-quality competitors.
Now they know this practice is risky because they only hear what the advisors want them to hear. Any information that interferes with the advisors' sales success is deliberately omitted.
Being influenced by the track records of the investment products the advisors recommended was cited by 77 percent. What they didn't know was that advisors picked the products for their recommendations after the performance had already occurred.
Since consumers had no way of validating when the advisors selected the products, the advisors could claim they picked the high-performing products before the performance occurred.
Finally, 64 percent said they were excessively influenced by a firm's name.
They assumed big firms only employed or licensed competent, ethical advisors, so they didn't find it necessary to ask questions about advisors' credentials, ethical histories and business practices. What they didn't know was that most brand-name firms have a substantial range in advisor quality and this range is not disclosed to consumers.
About Paladin Registry Inc.
Every month, thousands of consumers use the Paladin Registry's free public services to learn more about advisors, find pre-screened advisors and view documentation for their credentials, ethics and business practices. For more information, visit Paladin Registry at http://www.paladinregistry.com
Contact:
Jimmy Moock
Gregory FCA Communications
For Paladin Registry Inc.
610.642.8253 ext 153
Email