Broker Check

Have You Considered Your Options?

| December 31, 2018
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Earlier this year, Irina and I climbed Mt. Hood in Oregon. We spent the day before the climb training -  climbing and descending with crampons, practicing footwork, using ropes, and working on self-arrest with an ice axe. When we finished, we went back to the lodge and headed straight for the restaurant to grab an early dinner so that we could get to sleep and be well rested. When we arrived at the restaurant, the hostess gave us an intentional once over and asked us, “have you considered all of your options?”

What the hostess was trying to say was, “you guys aren’t dressed properly for our establishment.” In hindsight, we probably weren’t. We were wearing hats, mountaineering boots and pants, several layers on top, and in general, we looked pretty rough when compared to the other patrons. We did end up eating there, but I must admit that we felt a little uncomfortable the entire time – at that moment, we weren’t a good fit. This experience made me think about our industry, the financial services industry, and how there are so many options for people to get help with their finances. And how some may be a good fit, and some may not.

Here is a primer to help you consider your options about who to hire to help you with your finances.

Financial Planner    

This is a tough one. Because the job title is “not official,” and is not regulated. Be careful as anyone can call themselves a Financial Planner. This category requires a lot more due diligence on the consumer’s part.

Can help you set goals and understand the actions necessary to make progress toward them. Some planners will help implement action steps, some may not. Should be able to help you contingency plan for known risks. May or may not have expertise in all areas of planning. Some provide comprehensive planning, some plan in certain areas only. Might be a CERTIFIED FINANCIAL PLANNER PRACTITIONER TM or might not. May be a fiduciary or may not. Some charge by the hour, some charge by the project, some include planning as a byproduct of a product sale or a service provided. Many perform planning just to get a product or service sale. Not regulated.

What to consider: Certification. Fiduciary? Conflicts of interest. How do they make their money? Can they help you plan, implement and stay on track? Or is it a one-time thing? Is the planning performed just to sell you something?

Investment Advisory Representative

Affiliated with a Registered Investment Advisory firm. Must have passed the appropriate exam(s). Primary responsibility is to provide investment-related advice. Often creates investment objective based on time horizon and risk tolerance. May be able to create their own portfolios or may have to use portfolios that their affiliate firm chooses. May be able choose from a wide variety of investments or may have to utilize investments that their affiliate firm chooses. Will be a fiduciary as it relates to investments. Advice provided outside of investments is ancillary to the investment relationship. Charges fees typically based on a percentage of the investments managed. Regulated by SEC.

What to consider: Do you only need investment advice? Are you willing to limit your conversations mostly to the accounts being managed? Conflicts of interest. How do they make their money? Are they able to offer other services? If so, what and how are they paid?

Broker

Affiliated with a Broker-Dealer. Must have passed the appropriate exam(s). Primary responsibility is to sell investment products. May be able choose from a wide variety of investments or may have to utilize investments that their affiliate firm chooses. Investments must be suitable at the time of purchase. Receives a commission to sell investments. Not required to monitor the investments. Not required to meet with clients on an ongoing basis. May or may not be a Fiduciary. Advice provided outside of investments is ancillary to the investment relationship. Regulated by FINRA.

What to consider: Do you only need someone to sell you an investment product? Do you want to work with someone who can or is incentivized to sell only their affiliate’s products? Are you willing to limit your conversations to the investments being sold to you? Are you comfortable not meeting with the broker on a regular basis? Fiduciary? Conflicts of interest. How do they make their money? Are they able to offer other services? If so, what and how are they paid?

Insurance Agent

May or may not be affiliated with a specific agency. Must have passed the appropriate exam(s). Primary responsibility is to sell insurance products. May have to have securities license depending on what products are being sold. May be able choose from a wide variety of insurance products or may have to utilize insurance products that their affiliate firm chooses. For fixed insurance products, no suitability requirements. Receives a commission to sell products. Not required to monitor or service the products. Not required to meet with clients on an ongoing basis. No Fiduciary relationship. Advice provided outside of insurance is ancillary to the insurance relationship. Regulated by state insurance commissioners.

What to consider: Do you only need someone to sell you an insurance product? Do you want to work with someone who can or is incentivized to sell only their affiliate’s products? Are you willing to limit your conversations to the insurance being sold to you? Are you comfortable not meeting with the agent on a regular basis? Conflicts of interest. How do they make their money? Are they able to offer other services? If so, what and how are they paid?

Wealth Manager / Wealth Advisor

This is a tough one. Because the job title is “not official,” and is not regulated. Be careful as anyone can call themselves a Wealth Manager. This category requires a lot more due diligence on the consumer’s part.

Typically, wealth managers work with higher net worth clients and offer investment advisory services just as an Investment Advisor Representative does. But, their role may be far more encompassing in that they often can offer different services that address different aspects of a person’s financial life, including investment management, financial planning, tax planning, retirement planning, estate planning, insurance and more. May address all of these aspects or may address one or a few of these aspects. Must have passed the appropriate exams depending on the services being provided. May or may not be a Fiduciary. May or may not collaborate with your other advisors. Typically, the relationship is ongoing and regular meetings are held. May be able choose from a wide variety of investments or may have to utilize investments that their affiliate firm chooses. May offer financial planning, may not. May be compensated with fees and/or commissions. Regulated by entity(s) associated with services offered.

What to consider: Do you want ongoing help with financial aspects outside of investment management or insurance policies? Do you like the idea of working with one person (as opposed to several)? What services are actually offered? Certification. Fiduciary? Conflicts of interest. How do they make their money? Do they offer financial planning? What is their process to help keep you on track? Are they available to give you advice when you need help making decisions?

Most of the financial services industry can be grouped into Financial Planner, Investment Advisory Representative, Broker and Insurance Agent. And, many people can be served just fine by working with people in these groups. However, we believe that families who are in their second half, who have financial complexity, who lead busy lives, whose financial decisions will have an impact, and who have traditionally worked with multiple advisors might be best served by working with a Wealth Manager.

At Second Half Strategies, we are Wealth Managers. As part of our service offering, we do offer investment and brokerage services. But our core value proposition is our wealth management process, which was intentionally built to include Planning, Guidance and Advice. Our hope is to help you develop your goals, understand how to move toward them, provide proactive guidance along the way, and by limiting our client base, be available when you need help making decisions. We call our service offering Integrated Wealth Management because our process can help you address, coordinate and integrate most aspects of your financial life. All while putting your life at the center.

As you decide who to hire to help you in your Second Half, we think it’s important that you consider all of your options. After all, you don’t have many chances to get it right. You would hate to wind up in a place that wasn’t a good fit!

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