When I was growing up, my father taught me to embrace my paranoia, especially when it came to finance.
Because of Dad’s tutelage, I have always been skeptical of people who offer me money advice, and cautious of their possible ulterior motive. What’s more, embracing this paranoia (which Dad would call plain old good sense) has never steered me wrong. I’ve never fallen victim to bad money advice, nor have I ever regretted passing up an opportunity because of Dad’s wisdom.
Even if you were not brought up with such a healthy sense of financial skepticism, you can learn some of the warning signs of untrustworthy money advice. Here are four times when money advice is probably not being offered with your best interests in mind.
When they don’t disclose what’s in it for them
If you’re listening to fast food restaurants as a source of healthy eating advice, you are probably a little skeptical. These tips are not so much good advice given to improve your life, but more of a marketing ploy. As long as you are showing up to your favorite burger chain, they will make those profits whether you order a salad or a double cheeseburger. Your health is not really their concern.
This is the same thing that happens with corporations that offer financial advice. Credit card companies offer advice on the best way to improve your credit score, student loan servicers give you tips on how to budget better, and banks suggest ways to save money.
The advice that these companies proffer is not necessarily wrong. But these companies aren’t really invested in improving your life. They are invested in getting your money — which means they will give the advice that is most beneficial to their bottom line, whether or not it is the best advice for you.
Similarly, individuals generally don’t give you advice out of the goodness of their hearts. Unless you happen to be related to someone who is a financial professional, it’s unlikely that anyone will offer money advice to you without there being some sort of compensation. The question is whether or not it is clear what that compensation is and who will be paying it.
It is OK to ask someone who is giving you advice how they are compensated. Their reaction will likely tell you what you need to know about how far you should trust their advice. Many so-called financial advisers are actually salespeople who have an incentive to sell products. If your adviser tells…
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