Stigma of the Financial Services Industry

Before beginning a career in financial services, I had to get past the stigma that surrounds the industry. It is unfortunate, but the industry has not done itself any favors in the reputation it has created with the public consumer.

An assumption often made of financial advisors is they are only motivated by money; this perception of greed and sales-driven tactics attempts to convince the consumer to purchase products that may or may not be beneficial to the consumer. The reason for this is because of the history surrounding the industry.

Let me explain…

Since the inception of the stock market, there have been broker-dealers who work with agents to sell a particular product. Financial advisors who work within the broker-dealer space are typically compensated on a commission basis. This means they make money on trades taking place within an account and product sales.

Therein lies the issue, the conflict of interest.

The question that persists in clients’ minds is, “Do financial advisors make decisions based on what is best for me or best for themselves?” Due to this conflict of interest, the industry has started to evolve helping to bridge the gap of trust between clients and their advisors.

One of the biggest changes in the financial services industry is the introduction of fee-based planning.

Rather than being compensated for a product transaction, the advisor is paid a fee for the advice he or she provides. This way, advisors have no incentive to do anything other than provide the best financial advice for their clients.

The advisor’s focus in fee-based planning is on coaching and consulting the clients on strategies and concepts that help the client achieve their financial goals. There may be occasions that products are used as tools to implement the advice. This also allows the advisor to assist the client on the appropriate use of the tools. There is an array of financial products to choose from, which allows the client to establish transaction-free or lower cost alternatives.

The client is the one in control; the advisor simply provides guidance and clarity through the complexities of financial plans.

The transition to fee-based planning creates a different driving force within the financial services industry, which is built on relationships rather than sales. There will still be times where product sales are necessary (life insurance, disability insurance, long term care, etc.), but it is only one piece of the puzzle that is achieving financial freedom and a healthy relationship with your finances.

The focus should always be on the individual client. Each client is unique with their own goals, resources, constraints, investment experience, risk tolerance, etc. So, the planning process should be catered towards each individual client an advisor works with.

As the industry continues to evolve, make sure to do research on how your financial advisor is compensated.

Find out if your advisor is held to the standards of a ‘fiduciary.’

“A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients' interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other's best interests.” (Kagan, Investopedia).

Broker-dealers, insurance agents, and stockbrokers are only required to meet a suitability obligation for financial advice. Give yourself the peace of mind you have been craving and start working with a financial advisor who is held to the standard of a fiduciary.

I am thrilled to work for a team that values strong, long-term relationships. Being an advisor held to the fiduciary-standard, I seek to provide clients with the very best advice possible.

Money is simply a resource, and there are only three things that you can do with that resource: save it, spend it, or share it.

My goal is to help my clients discover what they value most, identify the best ways to allocate their resources in their lifetime, prepare for the certainty of uncertainty, and create a lasting legacy when they are gone. The client is in the driver’s seat, and I, with the help of my team, am providing the navigation to reach their destination.

If you found this article interesting and would like to continue the conversation, please do not hesitate to reach out to me.

Works Cited:

Kagan, Julia. “Fiduciary.” Investopedia, Investopedia, 5 Jan. 2021, www.investopedia.com/terms/f/fiduciary.asp.