Do you remember the scene from the movie Matilda when Harry (Danny DeVito) shows his son his dodgy-car salesmanship?
While highly over exaggerated in the film for the sake of comedy, it is true that whenever you buy something from a salesman, you should ask… what’s in it for them? It’s safe to say that a healthy amount of skepticism should probably be given to anyone trying to sell you a product. Shouldn’t that advice translate over to the world of investment products as well?
Especially following the financial crisis, the financial services industry is considered among the lowest trusted businesses.
It makes sense. Individuals tend have a hard-time trusting people who look at making a quick buck for a living. While that isn’t necessarily the case, it is true that there is a conflict of interest that often exists for many advisors (at wirehouses, independent broker/dealers, and insurance backed firms) who have an obligation to provide a standard of care for their client, but also have a sense of duty to their firms. Their compensation structure (having sales targets and commission based compensation packages) fundamentally misaligns the interests of both parties. That strikes us as a conflict that is unmanageable and ultimately, comes at the cost of the client.
In the fallout of the financial crisis, regulators have tried to step in over the last decade to ensure that the world of retirement advice acts without conflicts of interest, specifically by holding all financial advisors to a status of “fiduciary.” It means that these advisors who have potential conflicts of interest will have to increase their disclosures and explain what they do for clients as it relates to advice on retirement assets. These advisors are upset! While they might not admit it, they are concerned that this new rule will affect their income. The increased pressure these advisors are putting on the administration has resulted in the Labor Department seeking an 18-month delay in its implementation. While the rule is designed to protect the retirement savings of clients, the pushback could ultimately cause the rule to never get implemented.
So again, where do you as a client fall in this equation? Just how valuable is your “trusted” relationship?
That is where we come in. At Sherman Wealth Management, we have always been a fee-only fiduciary. That means while competitors are off arguing about fees, disclosures and conflicts of interest, we already subscribe to the status of “fiduciary” and will remain unaffected by the changes. We provide uncompromised advice and our compensation is not based on commissions or any salesmanship of a product. The only thing we are “selling” is our best customized advice for your unique financial situation. We believe that working with an advisor who is already committed to functioning in your best interest will give you peace of mind about your retirement savings.
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