In a perfect world, all investors would use the same process when they select financial advisors. The process would be based on complete objectivity so investors always selected the advisors with the best credentials, ethics, business practices, and services. But, that is not how the real world works. According to a survey conducted by Investor Watchdog (www.InvestorWatchdog.com), 74.2% of investors use subjective selection processes...Read More »
The media calls them “alphabet soup”. These are the strings of letters that appear after some financial advisors’ names. I think my personal record is interviewing an advisor who had 32 letters after his name. The “soup” represents the certifications and designations that professionals have obtained to increase their knowledge and improve the quality of their advice and services.
It is unfortunate, but the letters themselves do not mean much to investors. They recognize CPA®, but have no idea what PFS (Personal Financial Specialist) stands for. That’s about it. Very few investors have any idea what CFP® stands for. Even fewer know the value or requirements of CFA® or CIMA® designations...Read More »
The financial service industry is dominated by a sales culture that has flourished for more than 35 years. Wall Street companies protect this culture by spending more than $300 million per year on lobbyists who make sure industry regulations favor companies and not investors.
Two of the lobbyists’ biggest challenges are fighting fiduciary standards and mandatory disclosure requirements (transparency) for brokers. These activities are intertwined because fiduciaries are required to put investor interests first and withholding pertinent information violates this requirement...Read More »
In a recent Investor Watchdog (www.InvestorWatchdog.com) survey, 93% of respondents said they wanted increased transparency from financial advisors when they sell investment advice, services, and products. In particular, they wanted transparency for: Compliance records, education, certifications, experience, and licensing. This first form of transparency is more about you and your competence, ethics, and business practices...Read More »
Let’s start with a three-part definition.
Part I: Advisors who practice transparency provide accurate information to investors when they sell investment advice and services. The most important information documents the professionals’ education, experience, certifications, compliance record, fiduciary status, compensation, and services.
Part II: Transparency is synonymous with full disclosure. Advisors who practice transparency do not withhold any information that would impact investor decisions when they buy what financial professionals are selling.
Part III: The information is voluntary. Investors do not have to ask the right questions or go to FINRA BrokerCheck to obtain advisor information. Advisors make the process for obtaining information easy for investors...Read More »
Wall Street firms and their advisors used to have a major marketing advantage. Just a few years ago the majority of investors selected advisors from major firms because they felt safer. That feeling of safety has largely eroded because headline after headline has documented industry abuses that resulted in billions of dollars of fines. Several of the abuses were perpetrated by the biggest, most trusted names on Wall Street (Goldman Sachs, Citigroup). The result of the negative publicity is a major marketing opportunity for smaller, Independent Advisory Firms that no longer have to compete with the perception that bigger is somehow safer or better. Wall Street greed has leveled the playing field. However, you still have to convince investors to select you and your firm. Your best approach is to practice full transparency when you market financial advice and services. Only advisors and firms with nothing to hide can afford to practice full transparency...Read More »
I think most financial advisors know businesses that generate fee revenue are worth a lot more than businesses that generate commission revenue. In fact, they may be four to eight times more valuable.Most commission businesses sell for 25% of revenue because new revenues have to be generated by sales activities. The buyer is purchasing a customer list and perhaps some goodwill, but there is no guarantee investors will purchase investment products from the buyer. Compare that to fee businesses that sell for one or two times revenue. The value is much greater because the buyer is purchasing a repeat revenue stream with no sales activity required. If the buyer provides the same services as the seller, there is good chance investors will stay with the buyer...Read More »
Add-up planners, advisors, money managers, agents, and sales representatives and you have more than 1,000,000 people marketing financial advice, services, and products to the public. This has to be the most competitive industry in America.
Not only is the industry intensely competitive, it is also based on Wall Street’s conceptual sales practices. This explains why advisors with the best sales skills frequently produce the most revenue. However, it is not in the best interests of investors to select this type of advisor...Read More »
The following data is taken from an analysis that was developed by Paladin Registry (www.PaladinRegistry.com) in July, 2011.
Investors use two primary processes when they select financial planners and investment advisors.
57% of investors use a subjective approach that is based on the following criteria:..Read More »