Not all financial advice is created equal. Investors must be aware of financial advisors' differences to protect their financial interests.
The fact of the matter is there are two types of financial advisors:
Who you choose as your financial advisor is one of the most important decisions you will ever make for yourself and your family. In our blog, we’ll look at why you should consider partnering with a fiduciary investment advisor.
We get it. Managing your money is complex and often confusing. It can be overwhelming between the technical jargon, licensing requirements, complicated investment products, and various financial advisor compensation models.
So, how can you quickly determine if an advisor is a fiduciary? Start by asking about their licensing.
Series 7 License:
A Series 7 license enables registered representatives to sell a broad range of investment products for commissions: Stocks, bonds, options, derivatives, and other investment products.
This license means they've passed the General Securities Representative Exam, which covers industry regulations and basic information about various types of securities. This license does not require financial advisors to adhere to a fiduciary standard.
If advisors only have Series 7 licenses, they are paid commissions by third parties (broker/dealer, mutual fund family) to sell you their products (securities, mutual funds, etc.). Many of these advisors may claim their advice and services are free because third parties pay them. However, the third parties increase their fees to cover the costs of commissions.
Typically, little or no financial advice is provided after the sale because the financial advisor is paid to sell and not service what they sell. The one exception may be trailing commissions.
Series 65 License:
The Series 65 is designed for individuals serving as investment advisers who charge a fee to clients for their advice and services.
It covers laws, ethics, and various investment vehicles, ensuring advisors understand the industry's regulations.
A fee is paid directly to the financial advisors from one of their clients’ accounts. The fee may be asset-based, fixed, hourly, or fixed/subscription. Types of fees may vary by financial advisor. Many of these professionals refer to themselves as fee-only fiduciary investment advisors.
Working with a fiduciary financial advisor offers several advantages, especially if you have accumulated substantial wealth and require ongoing advice and services.
The truth is that Wall Street is infamous for its conflicts of interest. Big names in finance, like banks and insurance companies, often set sales targets for their advisors. Having been through a Wall Street firm’s training ourselves, we've seen it firsthand. That's precisely why we don't play that game. What’s best for the firm may not suit the client.
Many sales-oriented advisory firms get kickbacks for steering you toward proprietary investment products and the firms that pay the most significant commissions. This could mean they are selling the products that benefit them versus their clients.
Many of these firms are public companies, so their share prices benefit them when they sell investment products that generate more revenue and profit. This is the ultimate conflict of interest.
And don’t forget their turnover rates. The more transactions they create, the more revenue they generate for their firms and shareholders.
An advisor with a license to sell insurance might push insurance products—not because they're what is suitable for you, but because that is all they can sell. This is similar to stockbrokers selling stocks because their licenses allow them to do that.
So, how is the advice you're getting genuinely for your benefit or just a way to boost the advisor's income?
The truth is, you might not. Your alternative Is to select a fee-only, fiduciary financial advisor.
Here's what you get when you select Global View Investment Advisors:
Think of it this way. When you visit a doctor, you trust you're getting care from a certified, licensed professional whose sole responsibility is your physical well-being. It is the same at Global View, except our responsibility is your financial well-being. You do not expect your physician to be paid commissions to recommend the products of certain pharmaceutical companies. Unfortunately, we can't say the same for the financial service industry.
Being an independent Registered Investment Advisor, Global View is your financial fiduciary, always acting in your best interests and focusing on pursuing your long-term financial goals.
When choosing an advisor, accept no substitutes. Insist on a fee-only financial fiduciary!
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