The phrase “snake oil salesman” evokes images of con artists peddling miracle cures and empty promises. While the financial services industry has come a long way, the term still serves as a cautionary metaphor for unscrupulous practices. 

When choosing someone to manage your hard-earned savings, your financial well-being hinges on distinguishing between trustworthy financial advisors and those who may not have your best interests at heart.

In this blog, we’ll explore the history of the snake oil salesman, how to objectively evaluate financial advisors, and examine various ways advisors are compensated. 

Our team of Roseville financial advisors has developed a list of questions you should use when interviewing/screening advisors, which is included below for your review. At the end of the day, you need to be confident in the financial professional you hire to oversee your financial livelihood for the next 30 years or longer. 

A Quick History of the Snake Oil Salesman

The term “snake oil salesman” originates from the 19th century when Chinese immigrants brought snake oil to America. Made from Chinese water snakes rich in omega-3 fatty acids, the oil reduces joint pain and inflammation. However, counterfeiters began selling fake products as demand grew, often making outlandish claims about their efficacy.

By the late 1800s, “snake oil salesman” became synonymous with anyone hawking fraudulent products or false promises. The Pure Food and Drug Act of 1906 helped regulate these deceptive practices, but the lesson remains clear: not everyone offering a solution is trustworthy.

Watch our founder, Chris Bulman, discuss retirement income strategies and how much you should plan on withdrawing. 

The Importance of Due Diligence When Searching for a Financial Advisor

Unfortunately, much like snake oil salesmen of the past, not all financial advisors operate with your best interests at heart. That’s why selecting a financial advisor requires more than a gut feeling—it demands a structured, objective vetting process. 

You need an objective, apples-to-apples process that allows you to understand an advisor’s qualifications, experience, and investment process rather than an emotion-based process driven by the advisor’s sales skills.

Asking the right questions and understanding how advisors are compensated can help you identify those with your best interests.

Nine Questions to Ask Potential Financial Advisors

When interviewing financial advisors, use these questions to evaluate their qualifications, approach, and alignment with your goals:

1. Are you a fiduciary?

Fiduciary advisors are legally obligated to act in your best interest.

2. How long have you been providing financial advisory services?

Be sure to specify financial services experience.

3. How are you compensated?

Ask if they charge fees, earn commissions, or use both.

4. What is your investment philosophy?

Ensure their approach aligns with your financial goals and risk tolerance.

5. Who are your typical clients?

This can help determine if they have experience working with individuals in similar financial situations.

6. Do you have a minimum asset requirement?

Some advisors specialize in high-net-worth clients and may not be a fit if you’re just starting.

7. How often will we communicate?

Clarify how frequently they will check in and what level of service you can expect.

8. What services do you provide beyond investment management?

Comprehensive financial planning, including tax and estate planning, is a significant value add.

9. How do you measure success?

Their response should focus on helping you meet your financial goals rather than chasing market benchmarks.

Watch our video on the five key elements that should be a part of your financial plan. 

Understanding How Financial Advisors Are Compensated

Another important component to finding the right financial advisor is a clear understanding of compensation models. You may have heard the saying, “There is no free lunch.” The same applies to financial advisors. You should always understand how they are compensated and who pays them (you or a third party).

Here’s an overview of the most common structures:

• Fee-Only: These advisors charge a flat fee, hourly rate, or percentage of assets under management (AUM). They do not earn commissions on product sales, minimizing conflicts of interest.

• Commission-Based: Advisors earn commissions from selling financial products like insurance or mutual funds. While this can sometimes align interests, it may incentivize advisors to recommend higher-commission products.

• Fee-Based: A combination of the two, where advisors charge fees for services but may also earn commissions.

Examples of financial advisor compensation models

For example, you have $500,000 in investable assets and are ready to begin having a Roseville financial advisor assist you with overseeing those assets. 

Here are examples of how you would be charged for services based on different financial advisor compensation models:

• Fee-Only Advisor: Let’s say an advisor charges 1% of your assets under management (AUM) annually; your cost would be $5,000 per year. This is typically charged quarterly, and the fee is deducted from your account.

• Commission-Based Advisor: The advisor earns a commission from the product companies they sell, such as mutual funds or annuities. For example, if they recommend an annuity that offers a 5% commission, they would earn $25,000 upfront from your investment from the annuity provider. The product company recovers commission expenses through charges like mortality and expense (M&E) fees, administrative costs, or surrender charges.

• Fee-Based Advisor: A fee-based advisor might charge a lower AUM fee, such as 0.75% ($3,750 annually), while earning commissions on specific products.

Each model has pros and cons. Paying a fee to the advisor vs. a commission provides greater transparency.

Why Consider Bulman Wealth Advisors 

When managing your financial future, you need more than expertise—a partner who understands your unique goals, challenges, and values. At Bulman Wealth Advisors, our team of Roseville financial advisors goes beyond the numbers to deliver personalized wealth strategies that align with your life’s vision.

Here’s what sets us apart:

• We always put your best interests first, providing unbiased advice tailored to your needs.

• From investment management to insurance solutions, we offer a full suite of services to address every aspect of your financial life.

• Understanding how financial advisors are compensated is critical. At Bulman Wealth Advisors, we prioritize clarity and fairness, ensuring you know exactly what you’re paying for and how it benefits you.

• With deep roots in the Roseville and Temecula communities, we’ve built a reputation for confidently helping individuals and families achieve their financial goals.

• We take the time to get to know you, crafting solutions as unique as your fingerprint.

Contact us today to schedule your complimentary consultation and take the first step toward building a stronger financial foundation.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or an indication of future results.

Opinions expressed herein are solely those of Chris Bulman Inc. dba Bulman Wealth Group and our editorial staff. The information contained in this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Investment advisory services are offered through Chris Bulman Inc dba Bulman Wealth Group, an SEC Registered Investment Advisor. Insurance products and services are offered through Chris Bulman, Inc. dba BWG Insurance Agency and Ameritas Life Insurance Corp., CA State Insurance License # 0M46922. Being registered as an investment advisor does not imply a certain level of skill or training.

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