"Yes Men"

Typically we worry that financial advisors are getting us into investments from which they stand to profit. And if they are paid on commission, they benefit no matter what they suggest or we decide. But a new study suggests that they are biased in our favor - not necessarily to our advantage.

The study reported in Fortune showed that actors playing the part of investors seeking advice from financial planners, "walked out with advice that mimicked the biases in their original portfolio." Conservative investors, for example, comfortable with sitting on their cash, "were more likely to be told to take the cautious step of buying index funds."

"The most telling result came from the actors loaded with company stock. Just 40% of the planners told them to sell the stock and diversify their portfolio, even though the move would both be in the client's best interest . . . and generate commissions for the planner." (See, "The Yes-Man Problem.")

Why? The co-author of the study, Sendhil Mullainathan, a Harvard professor and recipient of a MacArthur "genius" grant, thought the answer was the overriding "need to get business in the door and have that client come back year after year." As a result, the planners avoided "the difficult conversations."