Below is a link to an excellent article in the New York Times. The article discusses the main differences between an investment advisor and an investment broker.
To begin, a broker usually works at a bank or brokerage firm. The broker does not have a fiduciary responsibility for your account and is working under the deeply engrained “sales culture” of their firm. What does this mean – caveat emptor! Be careful! Think about this – is it really worth your future retirement to trust a broker that is clearly driven by his firm’s bottom line and the fees that he will be receiving from selling you the product of the month?
Are they “trusted advisors?” No. They typically are not paid for advice or for creating a financial plan. They are paid by selling you something. But they do serve a purpose. They can execute well the trades that you direct them to transact. They can also offer many different suggestions. Just be careful!!
What about independent financial planners? They will provide a detailed plan, which is usually unbiased; however, there is a fee for such a service. According to the article, “Independent financial planners typically include an annual charge of 0.85 percent to 1.15 percent of your money, according to Cerulli, plus the investment costs. Alternatively, you can seek out a planner who will charge either a flat fee or by the hour. But the biggest difference between a broker and a financial planner is that the planner’s fee, more often than not, will include a holistic financial checkup …” This is mostly independent advice, but it is expensive.
We believe that the no one should rely on a broker for unbiased retirement planning advice – the “sales culture” is too flawed. We also believe that the independent financial planner, while not driven by a “sales culture,” is too expensive for the average guy. While estate planning advice is very useful in determining the best methods to minimize taxes on inheritances to children, such concern are not the concerns of the average guy.
When it comes to retirement planning, we provide: 1) unbiased service, 2) accessible on your time and at your pace (not your broker’s or advisor’s schedule), 3) the same retirement plan (if not a superior one), 4) with entertaining educational videos, 5) help selecting the securities that are appropriate for you to own from return, risk, and cost perspectives, and 6) at a very low cost, a cost affordable by the average guy.
As the article says, “the burden will always be on the investor to find a conflict-free “financial planner,” in the purest sense of the title.” Please consider joining us as a BowTie member!