This might seem a bit of a strange question but it is of the utmost importance in the Financial Service world of so many “advisors” that are offering their “services” regarding your money.
1-The insurance industry pushes it’s products for a commission. These folks provide service in helping to decide which product to buy. If you know you need auto insurance, you want to get the best coverage/service for the best price. The services of an independent insurance agent is valuable given the competitive world of auto insurance, and the same is true of the more complicated industry of life insurance, annuity products, and health insurance. Benefits, cost, underwriting, company financial solvency, claims paying history are important aspects in deciding what to buy, and the services of this agent is valuable. However, once the sale is concluded, and the policy is signed, sealed and delivered to the clients satisfaction, the level of relationship as “advisor” goes to staying in touch, sending Holiday greetings and such. Generally, since these “advisors” are primarily in the product distribution business, their focus is finding new clients and placing products, not overseeing the clients financial situation and advising on important financial issues that occur which are not related to the use of the sold product. Unfortunately, most insurance agents also fail in the servicing of their own clients and policy holders due to pressure to sell more product, and maintain their own income. They have to make a living, too.
2-Broker Dealer (B/D) reps push their firms products for a commission. They have a “grid” of 1000’s of investment products, each with their own compensation schedule and sales incentives. These reps are required to assure the products they sell to a client are “suitable” and “appropriate” per the regulations guidelines. They choose their recommendation from a menu of products as determined by their respective broker dealers set of products. Sometimes there is a better product that is not offered by their B/D so they are compelled to sell you on their products and against the competitors product, even though the competitors product might be a better fit due to underwriting, expenses, performance, or any number of other criteria. And in general, like their counterpart in the insurance industry in #1 above, since these “advisors” are primarily in the product distribution business, their focus is finding new clients and placing products, not overseeing the clients financial situation and advising on other important financial issues that are not related to the use of the sold product. Unfortunately, many also fail in the servicing of their own clients due to pressure to sell more product to meet production minimums and incentive trips. They have to make a living, too.
3-Mutual funds companies push their own funds for fees that are built into the expense ratio. These “advisors” make no claim to work for anyone other than their employer, the mutual fund company. Their advice will always be to recommend their fund family products. They are generally salaried by the fund company, rarely meet in person and are reached via a toll-free number. If you use a certain mutual fund exclusively for all your investments you will not get the same person every call, and they expressly won’t discuss anything other than your account, and don’t really advise, they service your account.
4-The Registered Investment Advisor (RIA) industry manages investments, gives advice and/or provides financial planning for a fee structure. This is discussed in advance of any financial transaction, and is established by contract between the client and the firm. These firms are regulated by one of two government agencies 1)The Securities and Exchange Commission (SEC) if the firms total assets under management (AUM) are over $100 million, and 2) by the State Securities Dept. in which the company is founded, if less. Generally, the RIA is not licensed to sell investments for commissions as are the big investment companies in #2 above, although there are some “hybrid” RIA’s that are dual licensed. Some will also have affiliations with insurance agencies since many boomers have needs that are best dealt with through insurance products. A comprehensive advisor knowledgable in all aspects of a client’s financial situation, and having experience dealing with most if not all financial products and services paid via a fee, with outsourcing relationships to handle those products and service that require a specialist, can best provide advice and service to the middle class boomer approaching retirement and/or beginning retirement.
Check us out at www.RChristianFinancial.com