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I was reading a Jason Heisler blog on the importance of not taking financial advice from broke people. This would be consistent with the teachings of Robert Kiyosaki of Rich Dad, Poor Dad fame and would seem like good advice. Jason does not appear to be a big fan of the financial services industry and makes some good points, but I don’t believe his scepticism should be directed solely to this sector.

In any financial transaction if the person across from you has a financial gain in your decision then you can’t be naive as to any potential bias behind their advice. As one of my colleagues in auto sales explained it, “At the end of the day, it does not matter to me which car the client purchases or if it is the ”perfect” car for them. What is important is that they purchase a car”. You have to love the honesty.

It is very important to surround yourself with the best financial mentors one can find, especially when they may have a financial stake in your transaction. The wealthier they are, and therefore the less your individual purchase impacts on their lifestyle, the more likely they are to provide you unbiased advice. This is by no means an absolute reality, just a logical assumption. Of course being wealthier, they know what worked for them based on their knowledge and experience. No need to reinvent the wheel. Just duplicate what they have already done if it is applicable to your situation.

See Jason’s blog below:

On my way to a monthly investment meeting I was playing passenger while a good friend of mine was driving and we were discussing real estate. Both of us are keen on investing in real estate and have real estate investments. We are also both looking to grow our portfolios and have both come to a crossroads where we have to find joint venture money. We had been discussing a few ideas and bouncing the ideas off of each other and coming up with even better ideas when I decided to let him in on one of the most important pieces of advice I have ever been given, ‘Don’t take advice from broke people.’ These are neighbours, friends, relatives or acquaintances who are not financially free or wealthy. They are the ones that come to you with a ‘hot tip’ on a ‘great’ investment or always talk about investing, yet never take action. Stay away from their advice, or take it with a grain of salt and do your own research on it. Make sure it is based on facts, not speculation. If it sounds too good to be true, it probably is.
And the sad reality is there are hundreds of ‘financial planners’ giving people advice on how to invest when they don’t necessarily know how to themselves. They take a course, graduate from it and then are somehow experienced and educated enough to give other people financial advice for their retirement. I still don’t understand how this is allowed. These financial planners – now I am not saying all financial planners here, as there are ones out there who deserve to be giving financial advice, just the ones I referenced to above – are glorified sales people. If they do not sell their ‘products’ they don’t get their commissions, which mean they don’t get paid. How is that financially free? Is it because they only ‘work’ when they want to? Is that what makes them qualified to give financial advice?
Anyway, I can go for hours on that topic alone and why I think RRSP’s are not a good investment and are going to keep Canadians broke in retirement.
The advice my mentor gave me (Don’t take advice from broke people) didn’t sink in right at that moment. For some reason, I put it on the back burner and carried on with life taking advice from my ‘financial planner.’ And as I did this, I watched the investments he suggested to me start to lose value, and lose value big. I lost close to 30% on my portfolio value because I failed to listen to my mentor. It was at that point, his advice finally sunk in. I had watched my portfolio lose value because I had taken advice from a broke person, and the worst part about it, I had paid him monthly to lose that money for me, the nasty reality of these types of investments.
Since that day, I have not taken advice from a broke person. I now personally (I can call them up and chat to them anytime) know more wealthy and successful people then I ever have before. These are the people I listen to when it comes to financial advice. And even then, I make sure to do my own diligence on what they suggest, because as the old adage goes, no one cares more about your money than you!
So next time you get some ‘great’ advice, just step back and consider who you are getting it from before you jump in. As the great Warren Buffet once said, “It’s only when the tide goes out that you learn who has been swimming naked.”