Jun. 28, 2005 - Objective Financial Advice |
Here are a few things you should know about me, financial advisers in general, and the kind of advice you can expect in this blog.
In order to remain objective and avoid conflicts of interest:
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I do not sell investments, insurance, or legal services
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I am not paid commissions or referral fees
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I do not charge "asset management" fees
These are important considerations when evaluating the advice you receive from any financial professional, even on a free blog service. A financial adviser's compensation arrangements may impact his or her views on financial issues and the resulting advice you receive.
I charge an hourly fee. That's so I'm not limited in my recommendations, or tied down to a particular implementation method or product line. My clients pay me directly to review their financial situations and then use my professional experience and judgement to provide solutions and plans that are in their best interests. No selling. No pressure. Just objective advice. You get the same thing from my blog.
(Note - This doesn't mean that those who do business differently are dishonest or untrustworthy. I'm only pointing out that conflicts exist and that consumers need to be fully informed and on guard.)
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Jul. 6, 2005 - Just a thought |
| Posted by carolinametzgers |
<<An adviser's compensation arrangements impact how he or she views every issue in the financial world.>>
My husband is a financial planner and he takes great pride in making sure that his views are objective no matter what compensation he gets for what investment. He does not receive more compensation for one stock vs. another. He has morals and values and he truly treats each and every client as if they are a family member. In fact, he very frequently recommends investing in real estate to develop "wealth," and he has no monetary compensation whatsoever in that area.
I think it's great what you're doing, BUT I'm sure that there are other financial professionals out there who would probably take offense at that very direct accusation. I would probably take the time to word that a little better. :)
Lisa Metzger
Mark, Lisa, Annalise (13, adopted from Kazakhstan 12-02), Kaitlyn (5 1/2), Ethan (4) and Julia Claire (due 10/10) Metzger
Matthews, NC |
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Jul. 6, 2005 - Good point |
| Posted by stevebraun |
Lisa:
Thanks for the feedback. You have a good point that the wording of that sentence was too direct and absolute. It makes it sound like every adviser, everywhere, in every circumstance will be impacted. That was not my intent. My apologies for any offense. Hopefully the tweaked wording is better. :-) Let me know.
I do believe, however, that the point I am making is valid with respect to compensation and the conflicts such arrangements create. People need to be aware that when dealing with an adviser who has a conflict of interest, they may not be getting advice that is in their best interest. That's a fiduciary duty and not all "advisers" are obligated to uphold that standard (see the Wall Street Journal, July 5, 2005, pages R1 and R5 for a lengthy article that covers these issues perfectly).
There's nothing dishonest, immoral, or illegal about it. But it will likely cost the client more money than other alternatives.
(On a personal note, my father-in-law is a retired financial consultant from Merrill Lynch. He's as honest and trustworthy as they come. So it's not like I'm carelessly shooting from the hip on this issue.)
All I'm saying is that the public needs to take this fact into consideration. The question to be asked is: "Does this adviser have a fiduciary responsibility to act in my best interest and is he willing to put that in writing?" Sadly, most advisers cannot answer that question affirmatively.
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Jul. 14, 2005 - Fiduciary Responsibility |
| Posted by Anonymous |
I am always concerned about fiduciary responsibility.
A relationship where someone (the fiduciary) acts in the capacity of a caretaker of anothers rights assets and/or well being. The fiduciary owes a ethical and/or legal obligation to carry out this responsibility with discretion and intelligence as well as honesty, integrity, and impartiality.
http://baowww.uoregon.edu/glossary.htm#F
The question is, if you are not paying directly for your financial planners advice then do they actually have a fiduciary responsibility to someone else? To the company whose product they are selling, who is actually paying them? I believe the answer has to be yes.
For example: I believe the nice real estate person who is taking you around showing you houses for free, should not be confused with a real estate agent who is actually working for you. Their fiduciary responsibility is not to you unless you specifically hired for a fee a buyers agent.
In my opinion, make sure you understand fiduciary responsibility of anyone giving you financial advice. A financial advisor who is not paid directly by you almost certainly has a fiduciary responsibility to someone else, hence, to be truly ethical and moral (not to mention legal), they MUST represent that partys interest, and not yours.
Just a laypersons understanding of the topic. Any lawyers out there?
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Aug. 2, 2005 - More About Fiduciary Responsibility |
| Posted by stevebraun |
Anonymous:
You've hit the nail on the head with respect to fiduciary responsibility but I would clarify your comments in two ways.
First, it is usually the case that the adviser's best interest matches that of the company/product he or she represents. Rarely would the two diverge. A company will normally structure its sales arrangements in such a way as to provide the adviser with financial incentives to take certain types of action or sell particular products. There's no need to distinguish between the two.
Second, I'm not sure that it's fair to say that an adviser not paid directly by the client is necessarily under a fiduciary responsibility to act on someone else's behalf (i.e., the company he or she represents). It is more the case that the adviser just isn't obligated to act in the client's best interest. They may choose the client's best interest but they don't have to. Instead, they are free to act in their own best interest which, as I stated above, is usually tied to the the best interest of company/product he or she represents. That's where a client has to be on guard. |
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