Investing with the Right Advisor Can Boost Your Investments


Investing with the Right Advisor Can Boost Your Investments

Are you making investment decisions that are in your best interest?

Your investment advisor or stock broker may be a friend, a community acquaintance, or just someone you’ve been working with for years. Most likely they’re respectable, hardworking, knowledgeable and they explore the financial industry for new investment opportunities. All of these things are important but the most important concern is whose side are they on? Are they legally obligated to put your interests in front of their own?  If not, they could easily be pushing you into high commission, hidden fee investments which are in their best interest and not yours. Would you be shocked if I told you that your advisor may not have your best investment interest in mind?

Recently, we were asked to review an individual’s investment statement. No problem, we do this at no charge; it’s always good to provide a second opinion. His concern was that he couldn’t understand why his investments were under performing. What we discovered was that his trusted financial advisor from a “respectable Wall Street” financial institution, who he’d been with for over 20 years, had been investing his hard-earned dollars in high fee, in-house mutual funds primarily because it was in the best interest for the financial advisor. This was costing this investor thousands of dollars and the worst part, he didn’t even know it.  To make matters worse, it had been going on for decades such that he was unaware of the compounding impact on his investment portfolio.

In this article, I’ll share with you what to look for, so you don’t fall into this Wall Street trap. You should be looking for investments that suit your goals and that are in your best interest. You, not your advisor, should gain the most from your investments.

Most of the Money in Today’s World is Managed by Brokers: Don’t be fooled, these brokers can have many names; financial advisor, wealth manager, agent, etc. These brokers are regulated by suitability standards, which are the lowest. Their obligation is to their shareholders and not you, the client they represent. On the other side, there are registered investment advisors who are fiduciaries. Fiduciaries are governed by law to put clients’ interests in front of the products or companies they serve. They are legally required to put your interests first.

There have been billions of dollars in fee related to lawsuits brought against managed brokers. As detailed in a recent article, Edward Jones and Morgan Stanley are being sued for charging excessive high fees for investment management.

Variety of Investments vs. In-House Investments: There are two forms of investment offerings, an independent product offering that seeks out variety of investments vs. a proprietary in-house investment offering. In-house investments are those that are owned and managed by the broker that is managing your account. With only suitability standards governing them, brokers can double dip. Double dipping occurs when the broker gets paid more than once. For example, the broker gets paid a fee for managing your account and then gets paid a commission for the investment he put you in. A recent New York Times article revealed that JP Morgan puts pressure on brokers to sell bank owned products, according to several current and former employees.

How Your Broker is Compensated, Drives His Behavior: If your broker (who is only held to low suitability standards) is paid more to sell you product A vs. product B which one is he going to sell you? The answer is, the product that’s going to generate more commission for him, product A. So, don’t be shocked if your broker is recommending a product or solution that makes him more money. And if your broker is making more money, who do you think is making less?

Let me ask you a question. If you had to choose between an advisor who is obligated by law to act in your best interest vs. his best interest, who would you choose? The answer is simple. Let me ask you another question. Would you rather be given a few investment options that may be suitable to your needs or would you want to know that your choices are the best available in the market place? The answer again is pretty straight forward, you want to choose from the best available investments, you shouldn’t be limited by what your broker is obligated to sell.

We don’t get paid commission on trades, we don’t get compensated for recommending one investment vs. another. We have an open investment platform to provide our clients with the best available products or programs that are available in the marketplace. All of our fees are contained in a small management fee that’s collected monthly through the investment portfolio.

If you’d like to get a second opinion about your investments, get a handle of the fees you’re paying and determine how to have more return on your investments, please give us a call. It doesn’t hurt or cost you anything to get a second opinion. Be obligated to yourself first, not your broker.

Disclaimer: This information is provided for educational purposes only. No statement contained herein shall constitute tax, legal or investment advice. This is not a solicitation for the purchase of any particular product. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as guidance designed to meet the particular needs of an individual’s situation. All individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. Investing involves risk, including the potential loss of principal amount invested. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company and are not FDIC insured. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.

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