Would it surprise you to learn that 85% of financial advisors are owned or controlled by a large financial institution? Or that some of these financial planning businesses operate under a name different to their parent company?

This means that more than 8 out of 10 financial advisors have a strong vested interest to recommend investment products controlled by the institutions they have a financial relationship with.

One of the many downsides to this is that many investment advisors can only recommend investments that are on their Approved Product List established or accepted by the parent company. Invariably many better investments simply cannot be recommended.

The reporting of the investments is only limited to the performance with no reference to how they compare to a suitable benchmark.

It’s no wonder that most investors are unaware of their portfolio’s true performance.

Quick - hide the benchmark

Unless your advisor supplies reports that compare your investment returns to a meaningful benchmark, you have no way of knowing how your portfolio is really performing.

Now, would it surprise you to learn that standard industry practice is to exclude meaningful benchmarks from client reports? You’re starting to get the picture.

Fund managers, financial advisors, stockbrokers – they all prefer to present investment returns in a way that conceals performance relative to the Market. It’s simply not in their interests to compare apples with apples.

Moving the goalposts, lowering the bar

Even when organisations do provide a meaningful comparison in a performance report, they sometimes alter previously set benchmarks to make their current results look better. The alteration of the benchmark will probably be acknowledged somewhere in the report, but since very few people read the fine print, thousands of investors can be misled.