When you hear the word “independent,” what comes to mind?
It’s an important question for investors and people nearing retirement.
That’s because, if you’ve yet to select an advisor, you’re:
- Looking for someone you can trust
- Going to want to work with a fiduciary who will put your interests ahead of their own
- Searching for a professional with:
- A college degree
- Important credentials like a CFP®professional, CFS®or ChFC®
- Good references and a solid reputation
- A thorough knowledge of the rules and regulations and workings of our industry
One of the best ways to check off all or most of the bullet points above is to only work with an independent, fee-based advisor.
Here are 3 important reasons to make that a priority.
1)Independent Advisors Can Offer You More Options
When you think of the word “independent,” you might be imagining a cowboy, Amelia Earhart, or maybe one of your favorite actors going it alone as a character in a play.
But it’s different when it comes to advising.
That’s because when it comes to being a financial advisor, “independent” doesn’t mean going it alone so much as it means providing advice that is not motivated by outside influences such as sales quotas or commissions.It also means the advisor isn’t limited to only being able to offer clients a limited family of funds or investments.
So when you think of independence, think of your doctor. Do you want him or her motivated by what’s best for you, and able to prescribe the best available treatment or medication? Or do you want him or her to only be able to recommend things that were manufactured by a single parent company?
2)A Fee-Based Compensation Model Aligns Interests
Independent advisors, and those who offer a fee-based compensation model,typically go hand-in-hand. Fee-based advisors should be offering you advice and guidance for a percentage of the assets they manage.
Fee-based matters because,first, it gives you clarity. You should always know precisely what your advisor charges, along with how that amount is calculated.
There should never be any surprises or hidden fees.
A second, less obvious reason you want to work with a fee-based advisor is because it aligns your interests. The better you and your investments do, the better the advisor does.
Third, a fee-based compensation model should mean you aren’t getting advice from someone working under the duress of sales quotas,who wants you to purchase high-commission investment products that aren’t necessarily the best option available to you.
3) Fee-Based Means Flexibility
Some popular investment products like permanent life insurance, certain types of annuities, and non-traded REITS,not only pay salespeople large commissions but can be difficult (and expensive) to get out of.
Conversely, an independent, fee-based advisor typically works with you to invest your money in securities that are traded on an exchange and are easily liquidated. Simply, if you need your money for any reason, you should be able to get it fast and without paying fees and surrender charges.
The power to locate a credentialed, independent, fee-based advisor who will always put your interests first is in your hands. You just have to know where to look and what questions to ask.