Second Opinions…an excerpt from Mo Lidsky’s latest book, Partners in Preservation.
second opinions

Imagine if your doctor was compensated based on the medicines you purchased or how often you changed medications. Or imagine if your lawyer was compensated based on the lawsuits you engaged in. This compensation model can only create toxic dynamics, and in the world of financial advisors, it incentivizes handing money to the advisor or buying investment products. It’s hard to see how any advice offered under such a model could be valuable.

That is precisely why Warren Buffett has often criticized the practice of labeling brokers as investment advisors. Buffett has said this misnomer is akin to calling a car salesman a transportation advisor or calling a grocery store clerk a nutritional advisor. He points out that the distinction between brokers and advisors is supposed to be similar to the distinction between pharmacists and doctors. One fills the prescriptions, but it is the other who diagnoses and prescribes the medicine.

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