When you go to the doctor, you expect him or her to provide care and medication specifically suited to your needs. If you learned that he or she received a fee each time he prescribed your medication, you might question whether the prescription was really best for you or just a way for him to make money. Doctors, of course, are legally and ethically bound to work as our advocates, so when they make a diagnosis or prescribe treatment, we can trust that it truly is best for our health and not just a way to make a profit.
When it comes to financial planning and investments, however, that distinction is not as clear. Many big brokerage and investment firms earn commissions from the mutual funds or other products they sell. The line between being your advocate and being a salesperson is blurred. So how do you know if you’re truly getting the advice that’s best for you?
The best way is to work with a Registered Investment Advisor or RIA firm. Registered Investment Advisors are required by law to act in their client’s best interest, and they do not sell products or receive commissions. RIA firms, then, have no conflict of interest or hidden agenda when it comes to serving their clients, and clients can trust that they’re truly getting objective advice.
It’s understandable that investors would want to work this way, but what may be surprising is that advisors want to work this way as well. In recent years, more and more advisors have left big brokerages and moved to RIA firms. Many advisors want to be unbiased advocates for their clients. They go to great lengths to protect their clients’ interests from their own firms, but it is not always an easy process. As a result, advisors feel they must make a change, and many are leaving brokerages and taking their clients with them. I am personally part of that trend, having come to Savant this year after working for 17 years at large, national brokerage firms. This has given me the freedom to focus on my clients and find the solutions that are really going to help them achieve their financial goals.
» Savant Capital Management, a nationally recognized fee-only wealth management firm founded and headquartered in Rockford, Illinois, recently expanded into the Peoria area. Its new office, located at 7535 N. Knoxville Ave., Suite C in Peoria, is headed up by Daryl Dagit, financial advisor, and Jim Foley, director of advisory and business development.
In 2007, Savant was the first firm in the world to receive The Centre for Fiduciary Exellence’s Investment Steward certification, recognizing a commitment to using best practices in objectively meeting clients’ financial needs.
“Savant has built its business helping families, businesses and nonprofit organizations in Illinois,” says Foley. “We believe in the communities where we work, and we care about our clients. Some may call it a Midwestern work ethic; for us, it’s just second nature, so Peoria is a natural fit for our firm.”
One of the other things that sets Savant apart, Foley adds, is its comprehensive, team approach. “We take a big-picture, long-term view of clients’ financial goals and develop plans that account for risk tolerance, tax strategies and more,” he says. “Our team includes client-focused advisors, planning professionals and tax experts who focus on managing your assets in the most risk-averse and tax-efficient manner possible. We even have a medical doctor on our team who draws on his specific experience to assist doctors with the investment and/or retirement needs particular to the medical profession.”
Of course, no one advisor or firm will work for everyone, but if you’re in the market for financial planning services, here are the top 10 things I would look for in a financial advisor:
- Standard of care. Is your advisor a fiduciary? A fiduciary standard involves strict legal and ethical behaviors that prevent conflicts of interest. The brokerage world is only bound to adhere to the “suitability standard,” a lower standard of responsibility in the care of their clients.
- Costs. What will it cost you to work with the advisor? What fees, commissions, transaction costs, etc. are applied to their services and any products you may purchase? Ask, “Are there any costs embedded in the products or services that are being recommended that I will not necessarily see when I review my portfolio?” Often there are, in the form of management fees, or 12(b)-1 charges. You have the right to know what the costs are. Anything in excess of two percent of the value of your portfolio is excessive.
- Qualifications. Certifications like CFP (Certified Financial Planner), AIF (Accredited Investment Fiduciary) and others indicate the advisor has advanced training and has met strict association requirements. Understanding your advisor’s certifications and education can help you understand his or her approach and ability to provide the services you need. Ask if your advisor’s certifications are nationally recognized, such as the CFP designation, or are internal designations conferred and recognized only by his or her firm.
- Organizational structure. Will you be working with one advisor, or is there a team approach? Is one person responsible for all phases of managing your assets, or is the advisor surrounded by other financial professionals with varied expertise? Does the approach to meeting your needs vary by advisor within the organization? Learn how the firm works and make sure it suits your needs. Often, the standard of care and professionalism varies greatly from one advisor to another, even in the same office of the same firm.
- Local control. If the firm is the local branch of a larger organization, knowing whether decisions are made at the local or national level will help you understand whether you’ll get the kind of customized solutions you need. Mistakes will happen in the best managed portfolios. Where do you go to get it fixed? Does the local manager have authority, or do you have to go to someone at a regional center?
- History. Length of time in business and the amount of assets the firm or advisor manages can be an indication of good wealth management services. What is their client retention rate? Do they have a lot of turnover in their clients? At a brokerage firm, you can check an advisor’s compliance history at the FINRA Central Registration Depository, available at finra.org/Industry/Compliance/Registration/CRD.
- Capabilities. Financial planning is a more comprehensive, long-term approach to wealth management than just investing in a fund here and there. If you’re looking for a big-picture solution and want an advisor who can guide you over time, make sure he or she offers financial planning services.
- Compensation. Knowing how the advisor is paid—through a fee you pay or from commissions on products—will help you understand the potential for any conflict of interest.
- Client experience. Will you meet with the advisor in person or work via phone and email? Are there regularly scheduled meetings to review your accounts, or are you responsible for getting in touch with your advisor when you need something? Understand how your advisor works and make sure it feels comfortable to you.
- Philosophy. Find out the advisor’s investment philosophy and be sure it fits with yours. iBi
Savant Capital Management, Inc. is a Registered Investment Advisor. Savant’s content should not be construed by any existing or prospective client as a guarantee that they will experience a certain level of results if they engage in the advisor’s services. Past performance is no guarantee of future results.