We keep it simple: Our guidance to you will be the same that we’d give to a member of our own family.
One thing is clear: Your interests must come first. Unlike the typical financial advisor, we sell no products. We don’t face a conflict between doing what’s right for a client and selling what pays us a big commission. Instead, our guidance will be tied to the goals we develop with you as part of our QuickStart discussion.
If your circumstances call for a conservative asset mix, we’ll see that you own a good amount of fixed-income and money market investments. If your objective is to grow your assets and you’re able to accept some volatility, we’ll include more stocks.
Unlike the typical advisor, we do our own investment research and management. We have strict criteria for what we are willing to buy for our clients. Our guiding principle is that our clients must receive a return over the long run that rewards them for the risk they take when investing.
What Other Financial Advisors Do
So, the guidance you get from us will be the same we’d give a member of our own family, and we do our own investment research and management.
Sounds simple. It is simple.
It’s also uncommon.
It’s more typical for advisors to operate in a way that provides them the best payoff.
The typical advisor begins, as we do, by developing a financial outline for each client. But what they do next is not what we do.
Their first step will be to “insure your future” by selling you an annuity that is guaranteed by an insurance company. They will recommend this as the safe way to provide you with an income stream to pay your monthly living expenses.
Their next step will be to outsource some or all of the management of your assets. In other words, your advisor will choose investment managers to look after your investments in stocks, fixed income and other assets.
Advisors who outsource will say – truthfully – that they are not investment experts. They will say that their role is to maintain your strategy, cover your need for guaranteed income, and hire the experts who will manage your assets.
Whose Interests Come First? Yours or Your Advisor’s?
The fact that the typical advisor does business this way shows that it has some appeal. It is better to have a strategy than not to have one. And the help of a financial advisor may produce better results than a person would get on their own.
But you may see some problems:
Is An Annuity Really the Answer?
People like the idea of guaranteed income. They want security. They want to have something that will hold its value when markets are volatile. However:
- Annuities can be very expensive and contain lock-up periods that restrict access to your money.
- The guarantee on an annuity is only as good as the financial strength of the insurance company. Your premiums and benefits can change for the worse, jeopardizing the security you were counting on.
- Advisors who sell annuities may be paid high commissions. That money is technically paid by the insurance company that issues the annuity contract, but they recover that cost from you.
A good advisor will tell you that there are other ways to provide guaranteed income. For example, you can get income with the best guarantee by owning US Treasury securities and FDIC-insured certificates of deposit. These are available at low cost and don’t tie up your money.
- Can you trust your advisor’s judgment about investment managers? Advisors who outsource admit that they are not investment experts. But how can they claim to know which investment managers will do a good job? As a practical matter, advisors may simply pick managers who have done well lately. If such success is due to luck, how well do you suppose your portfolio will do over the long-run?
- Can you really know what you own? The advisor who outsources won’t know much about the investments that are being made for you. For example, they may know that part of your portfolio is invested in large US-based companies, but they won’t know much more. Is the manager taking too much risk or overpaying for investments? The advisor won’t know.
Outsourcing Works for Them
If it’s not clear that this business approach works well for clients, there is no question that it works for advisors. Outsourcing frees up time so that they can look for new clients and sell more annuities.
We think our way of doing business is better. We provide the same guidance we’d give to a member of our own family, and we do our own investment research and management.