Should you pay upfront financial services fees?
By: Jonathan M. Lamb
Anyone with a computer can make a business card, create a LinkedIn profile, build a webpage, and BOOM! Instantly they are an expert in any field! Anywhere there is money to be made there will be sharks swimming. The financial services industry does not have the best reputation, but honestly it should have a worse reputation than it does. I meet people every day and they tell me “well (fill in the blank for name) told me this is industry standard.”
My biggest heartburn is when people pay upfront charges for financial or lending services. I understand that it is industry practice to charge upfront fees, but my bull shit meter always goes off. Time is not a renewable resource, some people’s time is more valuable than others, and everyone is entitled to be compensated for their time, but ask questions and know what you are paying for before you open up your wallet.
An electrician and a financial planner each has value to their time. I am all about specialization, I don’t want a financial planner fixing the wiring in my house, and I don’t want an electrician managing my finances. I don’t mess with electricity; you cross a wire the wrong and you can burn down your house or electrocute yourself. If you don’t understand finances you can have an equally devastating result. It is standard for a plumber or electrician to charge you to come out and look at your problem but can and will they fix your problem? In the skilled labor world, plumbers and electricians can’t make a living unless they can actually fix problems that they bid otherwise they will not be in business.
Unfortunately there are lots of financial planners and brokers that charges upfront fees with no ability to deliver what the claim. The reality is that people in financial services can and do make a good living turning fees without results. If a plumber fixes a toilet and it leaks again he will come back and fix it or refund your money, that is industry standard. If a broker does not deliver results will you get you your money back? If your financial planner charges you a fee to pitch you ocean front property in Arizona did you get value out of your consultation?
Do your homework, sometimes just because something is industry standard does not make it right. Professionals have every right to make a living for the value of their time and expertise, but so do you. It is true that you get what you pay for, but do your research before you pay for anything upfront.