I received an email from Fidelity inviting me to a free live webinar to explain options trading and ETF strategies. It got me thinking, why would they offer this for free? Could it be that offering education is a value add that makes their customers more loyal? Perhaps it could be that that they make a lot of their money from trade transaction fees, so enabling people to trade more makes sense? Or perhaps they make a lot of money from expert advice via collecting Assets Under Management, so a taster of expert advice will encourage more money to move under their management? Perhaps they are just good people. Alright, the last one is a joke! But the others may all be true.
I see expert education offered like this constantly. Sometimes its a paid ticket with a high price, sometimes the price is a token amount to cover costs, and sometimes it is free, like with Fidelity. Amazingly, people seem to fail to realize the difference between the three.
The difference isn’t in what you see (the price) it is in what you don’t see, the ‘angle’. With Fidelity I am drawn to the fact that they are encouraging me to learn about Options (short term, fast trades= high fees) but what happens when something appears so helpful, is priced so keenly, and seems like you cannot miss it?
There is a fair to moderate chance that you are the cow in this equation, nothing personal, but if someone is approaching you for something it is because you have something they want. Approaches can be passive or active, perhaps they just make something sound so amazing that you must have it, a farming approach, or they target you specifically, as a hunter would.
Rule Number 1 – Don’t be distracted by price
Free is a dead give away, but you aren’t the first person to figure that out. While it sets of massive alarm bells for the savvy, it doesn’t mean expensive, or ‘just right’ isn’t just the same.
Rule Number 2 – Understand the real game
The only way to really understand what is happening is to see the big picture. How are the people you are interacting with being compensated overall? The CFP board is currently battling this point with certain planners who claim to be Fee Only, but also own interests in commission based products – can they bring you in as a fee only event, and then influence you towards something that they have a vested interest in? It is often a game of smoke and mirrors.
Rule Number 3 – See this everywhere
Where else can you see experts offering advice? Why are they doing it, what do they gain from it? You can certainly gain knowledge from such avenues, but you need to keep an eye on the bottom line at all times, are you the player, or are you the game? Knowing where you fit into such a dynamic can create opportunities, such as the timeshare sales pitches that offer a weekend vacation ‘for free’. If you know the game, you can win at it.
The surprising thing is, many people don’t see the game.
Disclaimer, I receive no commission from products on Saverocity, but if you come to an event I organize I may trick you into buying me a pint.
I take odd pleasure in dissecting these schemes when I see them, perhaps you do as well. Commission-based financial advisers should be called by their true titles: salesmen, who frequently dabble in snake oil. I can only imagine how many millions of dollars have been lost over the years to fees and inappropriate investments as a result of attendance at “free” lunches.
Real estate agents run a similar game. To agents, it’s always a good time to both buy and sell because transaction volume drives their commissions. Conflicts of interest abound.
Unless absolutely necessary, I like to follow the adage that “using a broker will only make you more so.”
I’m not sure I have thought of it as a pleasure, but yes, I guess so- I’m always looking for the angle and do like to find it.
Agreed about realtors, and also headhunters.