Sorting through myriad choices of financial service providers can be involved. There are multiple types of providers, each with specific government regulations and particular ways of doing business. Providers fall into three broad categories:
- Banks
- Brokerage firms
- Registered investment advisors (RIAs)
In practice, hybrid arrangements between these categories add to the confusion. For example, large bank trust departments may employ brokerage firms to service smaller sized accounts, and brokerage branches are often located within bank retail offices.
Moreover, an increasing number of financial advisors, especially those seeking independence from established Wall Street brokerage firms, are “dually-registered investment advisers.” While they can charge fees as registered investment advisors, they also will earn commissions as a broker—and investors often unaware when the crossover occurs. Many investors look to bank trust companies to avoid commission conflicts, but are unaware of obtuse revenue-sharing schemes supplementing their published fee schedules—arrangements not permitted registered investment advisors without legally required client disclosure. Potential compensation conflicts are limitless.
Despite the growth of advisors adopting a fee-based model, and calling themselves things like “investment specialist” or “financial consultant” many are still acting like brokers or facilitators instead of client-focused, trusted advisors. Filling orders, following instructions, and saying what the clients want to hear—instead of what they need to hear—is what “order-takers” or “facilitators” tend to do. It can be a profitable model, but it is not truly serving the best interests of clients.
By contrast, trusted advisors are client advocates.They are not afraid to follow the courage of their convictions, to think rationally, and to maintain their discipline, even in the worst of times. We have a clearly stated and sound philosophy about investments and financial planning. We set expectations, educate our clients, and work in a collaborative fashion-always putting our clients’ interests first.
Differences between trusted advisors and facilitators:
[TABS_R id=6776]