You wouldn’t get advice on healthcare from a tobacco company, so why would you get financial advice from a bank?
Both tell you what they want you to hear. Not what you want to hear. There is a big difference.
They put their best interests ahead of your own.
Banks are experts at making things appear like they are in your best interests, yet most of the time they are not.
When I was in my early 20’s with no assets to my name, no dependents, and no partner, my bank sold me life insurance. They told me I really needed it so I believed them. After all, I thought they were an authority. I kept this insurance for about 10 years before I realized I was wasting my money.
How on earth is it a good idea for a single person with no debt, no assets, and no beneficiaries to have life insurance? That is not what was best for me. It was best for the banks thanks to my monthly premiums.
That’s not to say life insurance isn’t for anyone in their 20’s. You may need it much more than I did. You could have assets, debts, dependents, or beneficiaries.
The point is a good financial adviser should be unbiased, look at as many options as possible, and understand your unique situation.
Banks financial advisers are biased
Banks are definitely not unbiased. They will only sell you their products and services. If you are looking at joining Kiwisaver for example, and go to a bank for advice, they will only present you with their range of funds. Even if another companies fund is better suited for you.
Banks financial advisers won’t help you with other options
The only options a bank will look at are their own options. This is not a very wide scope of options at all. By not looking at all the relevant alternatives you are very likely missing out on the best option for your situation. In fact, you are more likely to be getting a product that is not suited to you at all.
Banks financial advisers don’t offer highly personalised advice
Just like my insurance story, banks see you as a dollar sign to be sold to. They may try and understand your situation to make it seem like they care and offering good advice but this all a front. All they are doing is trying to find out which of their own products and services is best for you. Even if it is not appropriate, they will still make the recommendation.
It is fake personalization.
Final thoughts
Bank financial advisers are professional salespeople. Their range of options are extremely limited, and they will try and sell you something even if there are much better alternatives available elsewhere.
This is not putting your best interests first. It is putting their best interests first. They need to be paid though, so of course they would sell you their own products and services. Since you are not paying them, you are the product.
The cost of you not paying for advice is that you have to pay for it by getting substandard advice that is not in your best interests and could cost you many thousands in lost opportunities or poor products.
Free or low cost financial advice can be very costly indeed.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here