Financial Advice & Consulting
How to Choose a Financial Advisor
Is Your Investment Advice "Best" For You
Investing can be complicated and challenging even to the most sophisticated investor. In fact, making sense out of the stock, bond and mutual fund world requires in-depth research of the various investment opportunities while simultaneously acquiring the knowhow to intelligently apply this knowledge. Many investors realize the challenge in managing this aspect of their lives due to time or desire, and choose to delegate this critical responsibility, but to whom? The financial world offers two broad avenues for investing, brokerage and advisory. Most investors are unaware of the difference, particularly when it pertains to fee-based accounts, so please keep this information (and us) in mind as you talk with friends and acquaintances that might benefit from our services.
Basically, an investment advisor and a broker serve their clients by making "suitable" investment purchases. Surprisingly, suitable investments are often in conflict with what's in the best interest of the investor. While an investment might appear appropriate, it might preclude being client oriented. For example, investments, which fall within the "suitability standard", may have incentives and/or higher expenses that are in the best interest of the broker, but not necessarily the investor. A TD Waterhouse article recently released the language that a brokerage firm must prominently disclose regarding fee-based accounts:
Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits and our salesperson's compensation may vary by product and over time.
Fortunately for investors, regulatory statutes hold investment advisors to a standard much greater than that of suitability. Advisors have a "fiduciary" responsibility to act in the best interests of their clients at all times and disclose any conflicts of interest. A fiduciary can be defined as one who "manages the assets for the benefit of another person rather than for his or her own profits." The bottom line being that investors benefit by receiving advice that they can trust that's aligned with their long-term and shorter-term financial goals and objectives.
The fee-only compensation model adds another level of objectivity for investment advisors by making the investor the sole source of compensation. Fee-only compensation is generally based entirely on the value of client's assets, which eliminates the conflict of interest brokers face by being paid by the product. In other words, your success is our success based on the appreciation of the portfolio, not compensation from investment companies or vendors for implementing their products.
Fee-only investment advisors sell an investment process, not a series of investment products. The differentiator between a broker and an investment advisor is clear, and tied directly to the success of your financial future where your interests take priority. At Brand Asset Management, we offer objective, high quality investment counsel that you can trust.
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