Why Hire an Independent Advisor To Further Your Financial Interests?

From books to blogs, from media mavens to marketeers, from pundits to pros … there’s never a lack of talking heads telling you how to make the most of your money. Why hire an independent advisor to assist with your financial interests? Why not just tap into all the free advice already available?

3 Reasons for Using An Independent Advisor

#1: Conflicts of Interest

Most “free” financial advice comes from people who have something to sell you (whether you need it or not), or who are otherwise advancing their interests ahead of yours.

#2: Lack of Personalized Interest

Even the best general advice may not be the best advice for YOU.

#3: Information Overload

Typically, the problem isn’t finding financial recommendations; it’s digging through far too many of them, along with their conflicting and confusing points of view.

For these reasons and more, it’s often in your best financial interests to hire an independent advisor. An independent advisor can help you sort through all the noise and confusion, and arrive at informed decisions about your financial future.

“Good advice is priceless. Not what you want to hear, but what you need to hear. Not imaginary, but practical. Not based on fear, but on possibility. Not designed to make you feel better, designed to make you better. Seek it out and embrace the true friends that care enough to risk sharing it. I'm not sure what takes more guts—giving it or getting it.” — Seth Godin

How Do You Find The Right Independent Advisor for You?

We’ve covered this subject in depth in our online white paper: “Choosing a Financial Advisor You Can Trust.” Here are six qualities to seek. Each helps you identify whether an advisor is best positioned to offer you the objective, personalized – independent – financial advice you’re hiring them to provide.

Compensation Structure: Fee-Only.

First, we recommend seeking a fee-only advisor. The transparent fees you pay your advisor should be their sole source of compensation. If your advisor also earns commissions or other financial incentives for recommending one product or service over another, it may influence the recommendations they make. In that case, the advice may be no better than what you could find on your own.

Business Structure: The Registered Investment Advisor Firm

Independent Registered Investment Advisor firms must provide strictly fiduciary advice to their clients across the entire relationship. This is because they are solely in the business of providing advice. In contrast, bankers, brokers or insurance agents, may offer “incidental” advice, but their primary function is to open accounts, place trades, and/or sell insurance policies.

Regulatory Agent: State or SEC Oversight

One short-hand approach to sorting out which role a prospective advisor may play is to determine which financial regulator oversees the firm. Registered Investment Advisor firms are regulated either by the U.S. Securities and Exchange Commission (SEC) or by their state, depending on firm size (as measured by assets under management). Other transactional-based businesses are regulated by other agencies.

Custody Arrangements: Insist on Independence

Even if your advisor checks out so far, there’s one more way to protect your interests. To protect yourself against scoundrels in disguise, it’s essential to ensure that your money is held in your name at an independent custodian reporting directly to you. This affords you the opportunity to review separate financial statements for any discrepancies. It also lets you log into your account, to keep an ongoing, “trust, but verify” eye on your assets.

Professional Affiliations: The Company Your Independent Advisor Keeps

As in most other professions, advisors can join trade associations they feel best represent their interests. Independent advisors often join NAPFA (the National Association of Personal Financial Advisors), and the FPA (Financial Planning Association). Finley Wealth Management is a proud member of both.

Investment Planning and Execution

How Stable Is the Strategy? How is your advisor managing your money?

• Will they help you establish a detailed financial plan and investment plan to document your personal financial goals and strategies?
• Is your investment portfolio structured according to decades of robust evidence on how to capture long-term market growth in accordance with your risk tolerances?
• Is the strategy implemented with efficient, low-cost solutions?
• Are all of your assets being managed as an integrated whole (including “outside” accounts such as your company retirement plan)?

Independent Advice Is Worth Paying For

“Successful short-term marketing strategies are rarely, if ever, successful long-term investment strategies.” – John C. Bogle

Bottom line, there is plenty of free advice out there. Unfortunately, most of it is either a sales pitch in disguise, potentially irrelevant to your own financial circumstances, or just plain confusing. For this reason, heeding all the overwhelming “free” advice available can cost you dearly. We recommend hiring an independent advisor to help you identify and implement your own best financial future.