There’s No Such Thing as an Unbiased Financial Planner

The following is adapted from The Retirement Secret by Pat Strubbe.

It’s logical to assume that there’s “one way” to invest that’s agreed upon by the so-called experts. But in fact, it’s the exact opposite.

If you interviewed one hundred financial professionals, you would probably get one hundred different recommendations. That’s because there’s no such thing as an unbiased financial planner.

Each financial planner brings their own biases to the table, which will influence their investment strategies and recommendations. Only by understanding and being conscious of this bias can you be sure to choose a financial planner who is on the same page as you and will make decisions that align with your financial goals.

Every Financial Professional Has an Opinion

You might be wondering what is behind a financial planner’s biases? The answer is that there are several reasons one financial professional might have a different perspective than another.

One, it’s fair to assume that some differences might be due to the advisor having a conflict of interest and pushing their clients in one direction or another. Compensation can be a strong motivator, and it might influence a planner’s recommendations, even if they aren’t aware of the bias.

Two, it’s important to realize that to provide you with any kind of guidance, the professional must have an opinion. They have to take a stance one way or the other, otherwise, what advice could they possibly give you?

As an example, let’s say you meet an investment advisor who tells you they don’t believe in managed mutual funds or picking stocks; they think everyone is best off in an index fund. Then you meet with another who believes that picking smart money managers is the key to successful investing. Both advisors have a bias based on their philosophy.

You hire a planner to help you make financial decisions, and by its very nature, that requires them to have an opinion.

Bias isn’t Necessarily a Bad Thing

Now that we can agree that every financial professional has biases, it’s important to know that biases are not necessarily a bad thing.

Although “bias” is often used with a negative connotation, that’s not how I mean it when I say every professional has an opinion. I simply mean that every financial professional favors one or more investment philosophies over others.

The vast majority of professionals truly believe they are doing the best thing for their clients, but you want to make sure their biases aren’t limiting you. Biases become bad if they cause a planner to not consider all your options when creating an investment strategy. Too often, financial professionals will not and cannot provide their clients with an optimal investment plan because their biases limit them.

With investing, one size doesn’t fit all, which means the right planner will design the portfolio that’s best for you and your unique needs.

Find a Planner Whose Philosophy Matches Yours

Biases aren’t necessarily bad, but they become a problem when your planner’s investing philosophy does not match yours. With mismatched philosophies, you don’t have the same expectations, which means you might take on more (or less) risk than you want.

Let’s say you consider yourself a pretty conservative person, and you go talk to an investment advisor who believes that investors should have all their money in stocks and bonds. When you tell them you’re conservative, they may respond by putting about half of your money into stocks and half into bonds.

Then 2008 happens, and your “conservative” portfolio loses 30 percent. Do you think there may have been a philosophical mismatch there?

Yes, yet it happened to thousands of people around the country in the early 2000s and again in 2008. And once again, in early 2020, many people lost a lot more than they expected to. Imagine the ones who had just retired — they probably felt terrified.

It is so important to make sure your financial professional has a philosophy that matches yours so you understand how much risk you’re taking on.

The Right Planner Will Help You Sort Through Investing Options

There is no such thing as an unbiased financial professional, but remember, that isn’t necessarily a bad thing. In helping you narrow down the seemingly limitless choice of assets for your portfolio, your financial planner should have biases. You want them to have an opinion.

However, it’s important that their opinion and their investing philosophy aligns with your own. Make sure they understand the amount of risk and reward you want to have with your investments, otherwise you set yourself up for unpleasant surprises, like investors who lost huge amounts of money in 2008.

The only logical approach to seeking out your optimal investment plan is to consider all of the solutions that are available, so make sure your chosen planner both shares a philosophy with you and has an open mind.

For more advice on investing for retirement, you can find The Retirement Secret on Amazon.

For over twenty years, Pat Strubbe has taught retirees and pre-retirees how to preserve their assets and increase their income. After watching his own parents struggle when his grandfather needed help, Pat made it his mission to help others avoid that pain. He has been featured in USA Today, Columbia Business Monthly, Investor’s Business Daily, and other national publications, and is a regular contributor on WIS News. You can listen to Pat host the radio show Save Your Retirement on WVOC (560 AM). Pat lives in Columbia, South Carolina, with his beautiful wife, Janelle. He’s the proud father of four children: Carter, Ava, Gabriella, and Isla.

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