My rich dad was a man with an open mind and someone who was courteous and attentive to many people.
He believed that any financial advice was better than no financial advice.
Ultimately, he relied on his own financial intelligence to make his decisions.
When it came to financial advisors, rich dad said:
“Your advisors can only be as smart as you are. If you are not smart, they can’t tell you that much. If you are financially well-educated, competent advisors can give you more sophisticated financial advice. If you are financially naïve, they must by law offer you only safe and secure financial strategies. If you are an unsophisticated investor, they can only offer low-risk, low-yield investments. They often recommend diversification for unsophisticated investors. Few advisors choose to take the time to teach you because their time is money. So if you will take it upon yourself to become financially educated and manage your money well, then a competent advisor can inform you about investments and strategies that few will ever see. But first you must do your part to get educated. Always remember, your advisor can only be as smart as you.”
Often, because people do not have a good financial education, they find advisors who they think will make their financial decisions for them.
They take this advice wholesale and without question because they have no way of knowing if it’s good or bad.
They assume that it’s good because it comes from an expert.
But most of the time, it’s not good. In some cases, it’s very bad.
For example, these ‘experts’ suggest a “one size fits all” solution, regardless of your debt situation. They don’t care if you have debt (good or bad), their prescription is the same: Invest in these products (stocks, bonds, mutual funds) that will make me (the financial advisor) the highest return (in the short-term).
Does that sound like someone who has your best interests in mind?
You (the investor) take all the risk and the the financial advisor gets paid regardless of the product’s performance.
To make matters more complicated, most “experts” won’t tell you that not all debt is the same. It’s not as simple as “debt is bad”.