Well, if you have to ask, it’s a sales pitch. That response may cause a chuckle or two, but it’s actually quite a useful test when you think about it. If a person’s goal is to sell you something, then how does one distinguish objective advice from a sales pitch? I don’t think there is an answer to that, so the logical solution is to avoid that situation. If you want financial advice without having to wonder if it’s a sales pitch in disguise, you’ll have to go to someone who doesn’t sell anything other than advice.

There are a lot of financial advisors who offer “free” advice. But realize, their advice is likely going to be that you buy from them.  Isn’t advising someone to buy their products the definition of a sales pitch? So, in that case, the “free” advice and a sales pitch are one and the same. Advisors that sell only advice won’t pitch products, and they’re not going to give their advice away either.

Why does this even matter? Aren’t the financial products sold by sales people the same as those a fee-for-advice financial planner might recommend? Not usually. Many financial products exist in two versions, advisor-sold and direct-sold. Advisor-sold products have additional costs when compared with their direct-sold equivalent. The extra costs are for product companies to pay the advisor for making the sale. When it comes to investing, you get what you don’t pay for because the fees you pay directly reduce your return.

Many of the financial advisors who also sell financial products are likely to disagree with me, and I suppose that is to be expected. Interestingly, many of these advisors are unable to tell the difference between financial advice and a sales pitch themselves. I do believe that the vast majority of financial sales people are well intentioned, and they probably do believe that the products with their added costs are the best solution.  After all, their income depends on believing that.

Lastly, I’d be remiss if I didn’t acknowledge that this is exactly the sales pitch you ought to expect from a financial advisor who is promoting fee-for-advice services.  And this post is nothing more than the “free advice” I’m calling into question. However, I think the relevant difference is when an advisor’s pay is tied to what they advise, not whether they advise.