“THE Great Recession has intensified a long-running debate: who is better able to look out for your money, a broker or an independent adviser? … At the center of the discussion are business practices and regulatory guidelines that are rarely understood by the client and often blurred in practice. Brokers are governed by the “suitability rule,” which requires them to have “reasonable grounds for believing that the recommendation is suitable,” according to the Financial Industry Regulatory Authority. Registered financial advisers are supposed to adhere to a higher standard — “fiduciary responsibility,” an ethical and legal requirement that the investor’s best interest comes first, not the adviser’s own financial gain….”
I finally found a way to help investors understand the implications. I work very hard to help investors know the right questions to ask to get to some kind of clarity around this, in essence it can come down to three questions, 1) How are they paid? By you or their firm, and is their any bias driven by commissions on financial products, bonus or quotas from their employer? 2) Do they have a fiduciary resonsibility all the time or not? 3) What is their investment philosophy, active, passive or rational & efficient or some combination. After these hurdles, then chemistry, service etc..are the most important assuming all have expertise and access to the full range of investments. For Plan Sponsors, a simple question is to ask if they are bonded, not the plan, but the advisor. As a Fiduciary, they need to have a bond to cover the plans. This is the way to determine if your plan’s advisor is truly in the boat the with y ou!
Tags: Investment Advice, Investment Style, linkedin, NEW