You’ve probably had experiences with different “advisers” without even realizing it (even at your bank). “Adviser” is a broad term ill-defined in the financial services profession.
A key part of financial education is to become more aware of what kind of “adviser” are you talking with (not only me, but with any other as well)?
Advice, planning and sales are all different from each other – and thus so are the advisers providing their service.
Financial Advice has a much broader scope than Financial Planning. I provide Financial Planning through Financial Advice. While Financial Planning requires Financial Advice, not all Financial Advice requires Financial Planning; the latter case commonly represents sale of products. They “advise” you to buy. Sale of products is the agenda of most banks, insurance companies, brokers and Wall Street by design to keep the corporation and shareholders happy.
More on the difference below by registration of adviser. Registration is one of the ways the consumer may begin to discern the differences between adviser and sales.
Financial Planning is a collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances following a well-defined financial planning process as explained later. It is more than the mere collection of information; and definitely more than just investing or buying a product.
Planning is the integration, analysis and synthesis of that many types of different information about you through a process that takes more than just meeting time and especially more than just one meeting (another differentiator).
I follow the financial planning process as developed by the Certified Financial PlannerTM Board of Standards. This process has two meetings (or more possibly) within it … the first for you and me to “get inside each other’s heads” more, and the second to go over assessment results that I develop between these meetings.
Fundamental difference between an investment adviser, and those who are NOT investment advisers, by registration and regulation.
I’m registered for fee only investment advice under the Investment Advisers Act of 1940 … How can you tell if someone is registered this way? Look at their ADV which they are required by the Act to give you either before or soon after you meet (you can request it earlier too) …. WHO is listed as the Registered Investment Adviser? Didn’t get an ADV? Then it is likely they’re registered under the Act below (for sales). Note that I am Not currently registered, and thus not able to advise, those in Texas or Louisiana which are States who don’t recognize adviser registrations from other States.
Fee ONLY means there is NO THIRD PARTY biasing the relationship through other compensation or incentives. Fees to the advisor are ONLY from the client, no third party. Fee ONLY is also how adviser can truly call themselves a fiduciary (Fiduciary 101).
I am NOT registered for investment sales under the Securities Exchange Act of 1934 which governs exams and licensing of brokers and dealers (who may work on as fee-based (commissions and fees). By the way, “free” really means you’re in this sales registration category, where payment comes later, typically through a product sales commission … so it’s not free; it’s deferred compensation from a third party potentially biasing the relationship. … so it’s not free; it’s deferred compensation. Secondly, what’s the compensation for? For buying something? Or for a true plan that goes beyond investments, but what goals, and how those goals, are met (i.e., broader planning)?
You will find is my completed advisor diagnostic, or comparison tool, with answers to many common questions (at the very bottom of my web page in the area called “Additional Information” ). It is useful for you to dig deeper into all sorts of questions and areas people have on their minds when interviewing a new advisor. Others have found it helpful for insights into what questions to ask and what answers they should look for (towards the end). A blank form is also here for asking other advisers to complete for you. This allows you to compare advisers without having to take the time for initial meetings and multiple phone calls. Those meetings and phone calls can come after you’ve whittled your list to one or two. You should drive the interview agenda, not them. It is a useful tool for comparing advisers and refining your questions to each one … a real time saver!
This article summarizes registration and other concepts along with links in one place so you may vet me better. I encourage you to go here , to my blog post, and take a closer look at verifying my CFP® registration, registration with NAPFA, my bio and more. There are major differences between how advisers are registered to provide advice, versus sales, that is discussed in the linked article as well.
Note: I use myself as an example above to better illustrate the differences between two general categories of advisers by registration and also by compensation. It is not meant to be a solicitation; only a real life example to make some key differentiating points. Beginning after 30 June 2020, the Consumer Relationship Summary (Form CRS) (mine is on my website’s homepage for an example of a real life one) will be an additional tool you may use to evaluate the choice of adviser you wish to have work for you, instead of working for the firm’s interest as well. You will get a Form CRS every time you transfer any retirement account, or open a new account of any kind, so question why if you don’t get one; and also when beginning a new relationship with an adviser the first time, along with their Form ADV.
Bottom line, you should get FULL disclosure through WRITTEN documents very early on, and not have to pull teeth or wait until you’ve done something with the adviser.
PS. What’s the Value of an Adviser?