For most individuals finding the right financial advisor is one of the most important steps they can take towards achieving a solid financial future. Though there are many advisors out there, choosing the right one can be a complex and difficult process. One of the most important aspects to consider is whether this advisor operates independently.
What is an Independent Financial Advisor?
In the financial services industry, there exist various platforms that financial advisors operate on. Some advisors contract with and operate under the umbrella of larger conglomerate firms that create and sell financial products and services while others are physical employees of said firms. Independent financial advisors operate as their name suggests and do not have an affiliation with any mutual fund company, bank or other corporate entity. Instead, independent financial advisors work with institutional investment custodians and other entities to provide the products and services they recommend to their clients.
What Benefits Does Being Independent Bring Clients?
Contrary to financial advisors that are employed by large national brokerage or mutual fund firms, financial advisors that choose to be independent choose to do so because it gives them greater ability to operate as a fiduciary and pursue the nation’s only financial planning designation that signifies this in the CFP®. In choosing to pursue the CFP® and operate independently these advisors commitment is to providing advice that is solely in the best interests of their clients. They want to be sure that it is not clouded by the potential bonuses generated by selling products their firm offers or may want them to sell.
Greater Choice in Financial Product Options
By being unaffiliated and soliciting the product options they recommend to their clients, independent financial advisors have the ability to choose mutual funds, and insurance products from a whole universe of providers. This allows them to truly choose the best investments possible for their clients and provide the greatest value possible for the fees they charge for their services. It also gives them the flexibility to adjust and create portfolios that truly suit their clients risk tolerance and financial objectives.
Ability to be Cost Competitive
In addition to allowing for greater customization and the highest quality of service, being unaffiliated allows independent financial advisors to be cost competitive and limit the fees and expenses associated with the products and investments they recommend. By having the entire fund universe available to them, advisors can find clients products that charge the lowest fees and expenses relative to the risk-adjusted performance they bring to the table. Additionally, independence allows them to have more control with their overall operating costs which more often than not trickles down to lower prices for the services they offer.
By not having a corporate agenda or having the pressure to sell specific proprietary products, independent financial advisors bring benefits from multiple angles of their operations. For a client searching for a financial advisor, these facts should be strongly considered when making their choice for whom to help guide them to a better financial future.
By: Kyle Grabenstetter MS – May 14th, 2014