As an advocate of financial literacy, it always astounds me the number of families and entrepreneurs I meet that don't have practical knowledge of money. I was at the same place when I was developing my career as a sole proprietor. I was good at making money, but I sucked at saving and doing something that would make my money work for me. I was hyper-focused on surviving.
Many people will blindly follow what they think is the money trail: going to a commercial bank for advice. Don't misinterpret my statement: banks play a key role in my financial firm. However, they may fall short on providing all the tools, services, and solutions to develop a practical, personalized strategy that includes educating clients about money. Here are the results of a recent J. D. Power study on the very subject.
How do you find an advisor that has your best interest at heart? Most people will rely on referrals from friends already working and happy with an advisor. You will typically find two types: captive - meaning they work for an institution and offer only their products or independent: meaning they are contracted with several financial services providers and can offer a multitude of products from all those providers. We will not debate the worthiness of either on today's blog - I will have that in the next one. You must examine what access you feel you need. Do you favor a particular institution based on historical performance: seek out that advisor. Do you feel at ease knowing that your personalized solution will have the best from a multitude of providers: seek out an independent advisor. You will likely perform your own research: examine the reputation of the providers your advisor is contracted with. Having multiple providers for similar services means an independent advisor can select specific services from those diverse providers to customize a strategy that works for you today and responsive to your changing lifestyle. Seek an advisor who is committed to developing a needs based strategy to prepare you for your future and takes time to get to know you.
What's your commitment as a client? Are you shopping around for the lowest price or are you looking for a long-term strategy? When actively looking for any service, you will always find someone to offer it for lower than the lowest you think you found. You need to ask yourself: are you committed to following a long-term strategy or are you looking for a quick fix that alleviates the immediate pain? In my experience - independent advisors develop their business mostly on referrals from happy clients; they work diligently to ensure clients are prepared and well served. They also need to work harder to maintain high standards. Clients are more information savvy than 10 years ago, even if they are still learning to connect all the dots.
The debate will go on between fee based and independent advisors. In the end you have to assess if the advisor genuinely acts in your best interest. As well: are you willing to act on sound financial advice?
If you want to understand core concepts in preparing for you future, download my guide