What should you look for when hiring a financial advisor? One key thing I believe you should be looking for is independence. There are many different types of financial advisors. In this article I will share with you some differences in the two main types.
What are the two main types of advisors? Independent and wirehouse.
An independent advisor doesn’t work for any investment or insurance company. As an independent financial advisor with Integrity Wealth Advisors, I chose to be independent. This is what it means for my clients:
- Unique: recommendations or strategies that we suggest support YOUR financial goals and dreams. No rules of thumb here.
- Flexibility: When it comes to implementing any solution, we are not limited. We can custom-tailor strategies that align with our clients’ goals. An independent advisor isn’t tied to a proprietary product lineup. Thus, there are less chances of recommendations having conflicts of interests. We don’t fit you into a box, we build you a box.
- We Have Taken a Fiduciary Oath: we have our clients’ best interests at heart at all times. Our focus is to always be open and transparent. No exceptions.
- Relationship driven: A client/advisor relationship should be built on advice, not sales. There should be no agenda other than helping you succeed. We find out what you care about. Only then can we start building a financial plan.
Another type of advisor is the wirehouse advisor. Before I go on I’d like to point out that there are great wirehouse advisors out there. I am going to point out what I have seen or become privy to. I will share a few things that concern me so that you can be aware of and avoid these situations.
A wirehouse advisor works for a larger investment or insurance company. This means they have someone else to answer to. Thus, there are some items for you to be aware of:
- Limited Solutions – These firms often have proprietary products which limits what they can offer their clients. This can force advisors to sell you whichever product in their limited lineup is closest to what you need. This would be an example of trying to fit you into a box. If you were hiring a contractor, wouldn’t you want him/her to have all the tools needed in their toolbox?
- Leverage – There is often a high amount of turnover with advisors in a wirehouse environment. Managers often use accounts that become orphaned (the servicing advisor retired, was fired, or left for another firm) as a recruiting tool to attract new advisors. Shouldn’t another advisor at the firm be immediately assigned the account to serve that client and help them pursue their goals? That just seems like common sense to me. Your account should never be dangled in front of an advisor during a recruiting pitch.
- Hot Potato – I have seen clients’ accounts get bounced around between advisors far too often. With the high turnover in many large firms, accounts often get reassigned frequently. You deserve to have a personal relationship with your advisor. Your advisor should understand your goals and dreams and build a financial plan around them. How can an advisor give you advice or recommendations if you do not have a personal relationship?
- Sales Bogeys – Wirehouse firms will often require that an advisor maintain a required level of production (sales) or else that advisor will be shown the door. They may even incentive advisors with lavish trips or lucrative bonuses to hit sales levels. This creates conflicts of interest. Is the solution being recommended because it is in your best interest or because it could win that advisor a trip to Mexico?
Conclusion: Why you should work with an independent financial advisor
It’s important to be aware of these items when looking for an advisor to team up with. I am passionate about helping people pursue their financial goals. It’s frustrating and disappointing when I see people getting taken advantage of. Hiring an advisor to help you navigate your financial journey is a big deal. You deserve great service, support, and a strong relationship with someone you trust. Don’t settle for anything less.