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.