Custom financial planning, sophisticated wealth solutions, fiduciary care.
When it comes to managing your money, choosing the right professional to guide you toward your financial goals is one of the most important decisions you can make. No matter how complex your finances are, your financial professional should be a trusted partner who addresses your unique goals and factors in your entire financial situation.
But not all financial professionals are alike. According to Mike Delgass, chief executive officer of Sontag Advisory in New York City, “financial professionals fall into two general groups, according to whether they sell products or advice.” While broker-dealers generally sell investment products and typically earn commissions, independent advisors1 primarily provide financial planning and investment advice—and many offer comprehensive wealth management—for a fee.
In the last decade, independent advisors’ share of managed wealth has grown steadily, while traditional broker-dealers and large banks have declined nearly 10% over the same period.2 “Independent advisors have become more sophisticated and expanded into real businesses over the past 20 years,” says Mitch Reiner, chief operating officer of Capital Investment Advisors in Atlanta. “There is a lot more depth to our services now, and that gives more confidence to investors.” Today, independent advisors manage the wealth of more than 34 million clients3 and account for $5 trillion in client assets.4 And they build lasting relationships―97% of their clients are loyal to them, according to a study from Charles Schwab.5
What’s unique about independent advisors?
They are fiduciaries.
Independent advisors are held to a fiduciary standard, the highest standard of care under law, which requires them to always act in your best financial interest. In order to do this effectively, they need to understand and take a holistic view of your total financial picture, providing full and fair disclosure of any pertinent facts.
By contrast, broker-dealers abide by a suitability standard, which requires them to understand their clients’ risk tolerance and financial situations and to recommend only products that are typically suitable within a given transaction. This means that broker-dealers are permitted to recommend suitable products that may pay them a higher commission over another suitable yet less expensive product.
Knowing that you and your goals always come first can help provide peace of mind. Plus, you know that independent advisors will look beyond the immediacy of a single investment decision to understand how each piece of the puzzle supports your long-term financial goals.
You are their first priority.
You could compare working with an independent advisor to working with a personal nutritionist who listens to your goals, evaluates your overall health, and creates an individualized food plan. A nutritionist has no incentive to recommend a particular food category or brand; their sole focus is your personal health and satisfaction.
Because many independent advisors own and operate their own practices, they are accountable only to you and are invested in developing a long-term relationship. For that reason, they will take time to get to know you and understand your goals. “In a world of farm-to-table restaurants and boutique clothing shops,” says Reiner, “I think there is a real value placed on working with an independently owned, locally managed business.”
They offer comprehensive financial planning and custom investment solutions.
Who better understands your finances than someone who sees the whole picture? As part of a broad wealth management plan, many independent advisors offer ancillary services—such as retirement planning, estate planning, and trust administration. Some may affiliate with specialized firms for these particular services, which gives them flexibility in offering comprehensive and tailored wealth management solutions.
“When your finances get more complicated, you need somebody to help coordinate all of the different aspects of your life,” Reiner says. “An independent advisor can offer honest and objective answers.” Reiner says. That’s the value of having someone in your corner who has a view into all of your finances.
Fee transparency is another hallmark.
Independent advisors typically charge a fee based on a percentage of the assets they manage for you (which helps to align their financial interests with yours―their fee increases when your assets grow). Or they are paid a flat fee. In either case, it’s easy to see what you are paying for. This kind of pricing offers assurances that an independent advisor is focused on your interests when building your portfolio―their compensation is not tied to investment products or trading activity.
They broaden your investment horizons.
Financially secure investors want far more than cookie-cutter investing solutions. Since independent advisors are free to choose from a plethora of investment products as they build your portfolio, they can offer a tax-sensitive, risk-aware investment approach tailored to your specific financial circumstances and risk tolerance.
Customization is a critical factor for clients with complex needs—as is superlative service on a deeply personal level. Working with an independent advisor can give you the confidence to know your interests will be protected and that you have a trusted partner to help grow your wealth and help to secure your financial future.
1 For this article, “independent advisors” refers to Registered Investment Advisors
2 The Cerulli Report: U.S. Advisor Metrics 2017, Exhibit 2.08.
3 2018 Evolution Revolution: A Profile of the Investment Adviser Profession, Investment Adviser Association
4 Charles Schwab Strategy estimates, May 2018
5 2018 RIA Benchmarking Study from Charles Schwab, fielded January to March 2018. Results for all firms with $250 million assets under management (AUM). Study contains self-reported data from 1,261 firms. Participant firms represent various sizes and business models categorized into 12 peer group—7 wealth manager groups and 5 money manager groups—by AUM size.
This content is made available and managed by Charles Schwab & Co., Inc. (“Schwab”). The purpose of this information is to educate investors about working with an independent Registered Investment Advisor (RIA). The RIAs and their representatives featured here use Schwab Advisor Services™ for custody, trading, and operational support. Inclusion should not be construed as a recommendation, an endorsement, or a sponsorship by Schwab. Many independent RIAs and other financial services professionals receive compensation for services in a variety of ways. Registration does not imply a certain level of skill or training. It is the responsibility of each investor to determine which method of compensation offers the lowest total costs and best serves the interests and needs of the investor. ©2018 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.