Broker Check

Has your Advisor declared independence?

February 14, 2014

Have you ever seen an eagle soaring through the sky in search of a meal?  They are magnificent creatures that admirably display their power and grace.  Have you ever seen a bald eagle in a cage?  The two may possess the same power and grace but the bird in the cage never gets to show it.  The same can be said for some of the investment advisors that work at big-name investment houses.  They may have all the skills and desire to do awesome things for their clients but the limitations put on them by their employer keep them from showing what they can really do.

Once an advisor spreads his wings he can offer three important things with greater flexibility than he was able to before, more investment choices, a deeper range of services and more ways to pay for the services.

More investment choices may mean more mutual fund choices but more importantly, it often opens the doors for advisors to offer different investment classes and vehicles such as private placements, limited partnerships, and alternative non-correlating asset classes.  These types of investments are tools that advisors use to address certain needs and achieve goals with more certainty than when they are not available.

The service that a broker provides often seems one dimensional.  This is because their employer limits them based on the lowest common denominator in the firm.  If a service could add extra exposure to the firm they may choose not to offer it even though one of their brokers would be able to take better care of their clients by using it, for fear that someone may misuse it.  The independent has a greater ability to provide other services.  They get to make the decision to take on or not expose themselves based on what is best for their clients.

Many brokerage firms make available some type of fee platform for certain clients these days as opposed to the commission only way they used to do business but investors can often find a better fit with an independent that also may allow for hourly or flat rate services as well.

Being an independent advisor is not all positive for the advisor.  It requires more responsibility as a fiduciary and the added discipline of running a business.  The Fiduciary standards of an independently registered investment advisor are much higher than that of a registered rep./broker.  You can learn more about these differences in Broker vs Financial Advisor out on July 5th.