Ok, so I might have taken a few liberties with that title. Bloomberg doesn’t even know who I am specifically, but if you need financial help a recent article on Bloomberg.com clearly recommends paying for unbiased financial advice vs talking to a commissioned sales person for free.
The article was discussing the rampant financial illiteracy among the general public and pondering what, if anything, the Consumer Financial Protection Bureau could do to actually protect consumers from getting ripped off. The main problem of course is that we have unsophisticated consumers pitted against sophisticated financial sales people and all the regulation in the world is not going to change the inequity of that scenario.
From The Article…
Simply put, the problem of poor consumer financial decision-making is large, and current regulatory solutions won’t solve it. The only alternatives are market-based solutions. Consumers need advice. If the value of better financial decisions is great and the cost of education is large, consumers should simply pay for financial counseling. Yet the market for consumer financial advice seems small and ineffective.
One of the reasons is that biased advice — provided by advisers who are pushing a product for which they get a commission — can drive out fair and neutral counsel. Biased advice often appears to be cheaper, and consumers may be ignorant of the bias or discount it. Disclosure of conflicts may not be mandated and, even if it is mandated, there is evidence to suggest that such disclosure may be ineffective.
The article highlights a humongous problem in the debt relief industry that nobody wants to talk about because they make a lot of money as a result of this inequity between the sophistication of the seller vs the buyer.
Ask yourself a simple question.
I Need Financial Help, Who Do I Call?
Think about it. There are 800 numbers offering free consultations for people who need financial help all over the place. Who is on the other end of these phone calls offering this great free help? Educated, experienced, unbiased financial consultants who are donating their time for free to evaluate your situation and tell you exactly what you need to do without trying to sell you something you don’t need? Nope, not even close.
1. Credit Counselors will try and sell you credit counseling and tell you debt settlement is a scam.
2. Debt Settlement companies will try and sell you debt settlement and tell you that credit counselors work for the banks, and that bankruptcy will ruin your life for 10,000 years.
3.Bankruptcy attorneys will try to sell you bankruptcy and tell you that debt settlement programs don’t work.
Are these programs telling you that their solution is the best option for you because it really is, or because they only get paid when you enroll into their program? That is a good question. Are you willing to bank your financial future on the hopes that the sales person is going to put your financial well being above their own?
Are there exceptions to this? Of course. There certainly are good people out there that even during a free consultation would not sell you their program if they didn’t think it was right for you. Here is the problem. Those people are so few and far between and you would never find them on your own anyway because they don’t make as much money as the programs that sell their solution to anyone that is fogging a mirror. Who has more money to blow millions on advertising? The honest guy, or the con man? Further, how would you be able to tell the difference between the two?
I know many consumers won’t pay for a consultation with me because they unfortunately think they will get the same information for free. I know I can’t save every consumer out there, but as was clearly pointed out in the Bloomberg article, “biased advice appears to be cheaper,” but if you need real financial help, a free consultation is not likely to provide it.