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Fiduciary Or Broker? Many Financial Advisers Wear Both Hats
FYI: While the Obama administration is pressing for more financial advisers to operate as “fiduciaries,” the reality is that many advisers currently wear two hats.
There is nothing confusing other than the writer, who as the WSJ notes, writes about how financial advisers can "build and improve their practices" - not how they can best serve their customers.
Most of the article is about how "advisers" can charge for their services - percentage of AUM or commission. (It doesn't discuss fee only - based strictly on time and effort.)
If someone is a fiduciary, there is no confusion, no conflict. The adviser is to ignore any benefit he gets from the fee arrangement and recommend the best investments for the customer. Period. That's what the government is recommending, and why articles like this try to confuse matters.
If someone is a fiduciary, there is no confusion, no conflict. The adviser is to ignore any benefit he gets from the fee arrangement and recommend the best investments for the customer. Period. That's what the government is ....
In Reality That never happens.... "advisers" always have their interest at heart, You or the Government will never change or regulate that unless they can change human nature and typical business practices of the investment industry......(they can't/won't) all in my lifetime investing experience and opinion
Obama's Fiduciary Plan: "There are a lot of very fine financial advisors out there, but there [are] also financial advisors who receive back-door payments or hidden fees for steering people into bad retirement investments that have high fees and low returns," he added. "So what happens is these payments, these inducements, incentivize the broker to make recommendations that generate the best returns for them, but not necessarily the best returns for you."
As a sentient (or at least semi-sentient - my wife made me say this) carbon-based life form (yo, Spock), I can assure you, based on over 35 yr. in a profession in which personal benefit could be in conflict with the best interests of those served, fee for service or commission-based reimbursement poses stresses difficult to resist. There is a pressure to increase the services offered or the products recommended. Ultimately, I opted for the reduced income and the reduced stress of an employed position, where my recommendations were not financially altered. OTOH, if the adviser, taking a small percentage of my investment portfolio, sucks down over a month's worth of income yearly, regardless of the quality of the advice, the eye I turn towards them is definitely jaundiced. I plan to send my lovely wife to meet a Garrett network member to discuss her age 70 options to see if the adviser meets my standards, since the situation is moderately complex. I hope the result is positive, so I can get an opinion regarding the next 30 years. The unfortunate reality is that honest financial investment advisers probably can't make a decent living. I may want to buy 3 or 6 hours of advice a year, and even at $500/hr (and, yes, I would be complaining loudly), it is less than any percentage-based advisory service. OTOH, I'd trust the hourly advice more, since I'd presume they were trying to earn my money.
Comments
Most of the article is about how "advisers" can charge for their services - percentage of AUM or commission. (It doesn't discuss fee only - based strictly on time and effort.)
If someone is a fiduciary, there is no confusion, no conflict. The adviser is to ignore any benefit he gets from the fee arrangement and recommend the best investments for the customer. Period. That's what the government is recommending, and why articles like this try to confuse matters.
In Reality That never happens.... "advisers" always have their interest at heart, You or the Government will never change or regulate that unless they can change human nature and typical business practices of the investment industry......(they can't/won't)
all in my lifetime investing experience and opinion
"There are a lot of very fine financial advisors out there, but there [are] also financial advisors who receive back-door payments or hidden fees for steering people into bad retirement investments that have high fees and low returns," he added. "So what happens is these payments, these inducements, incentivize the broker to make recommendations that generate the best returns for them, but not necessarily the best returns for you."
obama-fiduciary-plan-targets-advisors-back-door-payments-hidden-fees
OTOH, if the adviser, taking a small percentage of my investment portfolio, sucks down over a month's worth of income yearly, regardless of the quality of the advice, the eye I turn towards them is definitely jaundiced.
I plan to send my lovely wife to meet a Garrett network member to discuss her age 70 options to see if the adviser meets my standards, since the situation is moderately complex. I hope the result is positive, so I can get an opinion regarding the next 30 years.
The unfortunate reality is that honest financial investment advisers probably can't make a decent living. I may want to buy 3 or 6 hours of advice a year, and even at $500/hr (and, yes, I would be complaining loudly), it is less than any percentage-based advisory service. OTOH, I'd trust the hourly advice more, since I'd presume they were trying to earn my money.