As a financial advisor, I don’t consider myself an advertising or marketing expert. I have been seeing a TON of ads from a certain financial firm and I found myself wondering how common it is to take standard features of a product or service and turn them into differentiators.
The real comparison the firm is highlighting in their ads is the old-line commission structure versus the fee-based/advisory structure. The ad touts that the firm acts as a fiduciary which is a standard part of the advisory structure. This would be like a car company advertising “Our cars have wheels that let you roll forward AND backwards!”. Selling a fee structure where they do better when the client does better is … um, pretty sure that is how percentages work (1% of a larger number is a larger number)! And selling that they customize portfolios is a really low bar. To use my earlier analogy, “Our steering wheel lets YOU choose where to go!”.
Anyway, my point is not to trash another company but simply to educate folks who are seeking out a financial advisor/firm. Financial firms, for the most part, all offer exactly the same platforms and they shouldn't sell the platform as a "feature". As mentioned earlier, investors must first make the core decision of whether to seek out the commission or fee-based structure based on their situation and the services they want. Once that decision is made, what really differentiates one from another comes down to a couple of key things:
- Their investment philosophy/bias. How do they view risk? What investment products do they prefer to use? Do they believe in active or passive management?
- Their service. How often are they going to review/update the portfolio? How often are they going to meet with you for formal updates? Does the fee cover just portfolio management or broader planning services?
- Their engagement. Look back at the advisor’s/firm’s website and social media feeds during a recent market event or crisis to see whether they were actively putting out information. Are they engaged with their clients or sitting back hoping nobody calls?
One of the best ways to learn this type of information is by talking to existing clients. Don’t be fooled by advertising that steps over an intentionally lowered bar. Focus on what matters to you, ask good questions and make sure there is solid match between what you are looking for and the services the advisor provides. Obviously cost matters too, but value matters more. This is rarely an apples-to-apples comparison; would you expect to pay the same when one firm includes comprehensive financial planning and one just includes portfolio management? Knowing what services you want will help you evaluate advisors/firms on your terms, not theirs.
If you have questions about the industry, terminology or structure, please ask. No assumptions; one of my personal goals is to educate investors so I am always happy to help make sense of my industry!