FINANCIAL ADVISOR COMPARISON

From a stockbroker to a bank investment officer or an insurance salesman, there are an endless number of so-called “financial advisors.” It’s important to understand the differences between these advisors by asking the following questions:


1) How is my advisor compensated?

2) Are there any conflicts of interest in my client-advisor relationship?

3) Does my advisor always work in my best interests?


As we mentioned above, financial advisors come in many forms, but they tend to fall into two categories: “fee-only” and “fee-based.” While their names are similar, there are several important distinctions between the two in terms of their business models. (Full disclosure: Pittenger & Anderson is a fee-only investment advisor.)


Fee-only:

• compensated only by their annual management fee

• does not participate in commissions or transaction fees

• held to a fiduciary standard of care; required to always act in our client’s best interests


Fee-based:

• most traditional stockbrokers have moved to this model

• compensated by a management fee plus commissions, transaction charges, and other sources

• not held to a fiduciary standard of care at all times

• often paid by the products they recommend for your account


The fee-based model introduces our next topic: conflicts of interest. A conflict exists whenever the client’s and advisor’s interests do not line up. To find out if conflicts exist, ask your advisor the following question:

Are you required by law to act in my best interests at all times, i.e. held to a fiduciary standard of care?

If your advisor is not held to a fiduciary standard, understand that they might not always have your best interests in mind. P&A is held to a fiduciary standard and required to act in our client’s best interests at all times. Fee-based advisors are not held to a fiduciary standard of care at all times. If you’re not sure what standard your advisor is held to, ask them to read and sign this “Statement of Fiduciary Responsibility.”

A fee-only advisor typically offers a better value to clients than a fee-based business model. Using no-load mutual funds, discounted commissions, and being cognizant of fund expense ratios allows P&A to save our clients money. We have access to thousands of no-load, no transaction fee funds as well as many institutional-level funds and investments. If we don’t have access to it, there’s a good chance it’s not a good deal for you.

If you’re looking for an advisor who fully discloses all fees, offers unbiased financial advice, and who always works in your best interests, then a fee-only advisor like Pittenger & Anderson might be a good fit for you.