By: Frank Armstrong, III, CFP®, AIFA®
Fee-Only Independent Registered Investment Advisors are an entirely different animal than the brokerages, broker-dealers, insurance companies, and banks that have traditionally dominated the investment advice market.
The traditional commission based sales model is fatally flawed and cannot be fixed. It’s almost impossible to provide fiduciary standards of investment management if the advisor is commission based. External influence and production pressure make any recommendation suspect. The investor’s best assurance of objective advice is the ironclad separation between the advice and brokerage functions. That’s why we think our fee-only compensation is so important to you. Do you really want to pay for tainted advice?
But there are additional compelling reasons for investors to prefer an independent approach. The Fee-Only, Independent, Registered Investment Advisor is a viable and attractive alternative for individuals, trusts, pension plans and nonprofit organizations demanding high quality investment advice and portfolio management.
First, let’s acknowledge that we are not a giant name brand institution. We thinks that’s a good thing. Size and advertising budget do not translate into objective advice, tailored individual service, or integrity. There is simply no relationship between size of the organization and its ability to provide quality services.
Investors might correctly wonder about the financial integrity of a small firm. However, that’s not an issue. We don’t have a penny of their assets – ever. Instead, they should look to the financials of the custodians that they select to hold their accounts. (Our clients have their choice of three of America’s largest discount brokers). We provide advice and management for their accounts under a limited power of attorney that gives us the right to direct investments but not withdraw funds. In fact, we could all disappear without a trace and their funds would be secure.
At Investor Solutions we sell only advice and management services. We work only for our clients and have no hidden agendas. We are paid directly by our clients, and have no other sources of income. Our fees are totally transparent and fully disclosed. We are fiduciaries, we expect to be held to those standards, and we pledge to make all recommendations exclusively in the best interests of our clients.
If you look at the educational qualifications, professional designations, and experience of our advisors, I believe that you will conclude Investor Solutions compares favorably to any other organization of any size. Every one of us could find employment at Wall Street firms. But, we sincerely believe that we can better serve you in an independent firm.
It’s important to understand that some of the important things that differentiate us from traditional Wall Street are the things that we are not:
We have no financial ties to any of the products that we recommend
We don’t have proprietary products
We don’t sponsor IPOs
We don’t custody assets
We don’t make markets in stocks or other securities
We don’t receive commissions, revenue sharing, 12(b)-1 fees, or other incentives from the companies we recommend
None of the above activities benefit investors. In fact they create substantial conflicts of interest that have not – to put it in the kindest possible terms – been well managed by Wall Street.
We don’t risk our own capital in ways that endanger the financial integrity of the firm. It cannot be comforting for investors to watch the giant brokerages fail, sell themselves off at pennies on the dollar to foreign sovereign funds, or beg for bail outs from Washington. Their irresponsible highly leveraged trading activities have jeopardized their very existence. Not only have the giant Wall Street firms proved conclusively that they are not good stewards of your money, they couldn’t even manage their own.
Small can be better
We believe Investor Solutions has access to the very best products and services available to investors anywhere. To provide them, we leverage the resources of America’s largest discount brokerage houses for trading and custody services. We receive no financial compensation from these companies. They provide services to you in return for nominal fully disclosed transaction fees.
Each custodian offers an almost unlimited menu of product choices for us to select from. This blank sheet, open architecture approach is a stark contrast to the restricted offerings that brokerage offer. Wall Street’s brokers may only sell proprietary products or products where the parent firm has a sales agreement. In practice this precludes them from offering true no-load index funds or other products with limited financial benefit to the brokerage house. Their well known preference for high cost, high profit, high commission products rarely benefit their customers.
Having your assets held by an independent third party custodian provides an additional layer of protection for you. You get the best of both worlds: the financial strength of one of America’s strongest institutions, and the personal relationship with a dedicated team of professional advisors at Investor Solutions.
By outsourcing many non-core functions we are free to concentrate on supporting you. We outsource Information Technology (IT), Human Resources (HR), Web site development, legal, accounting, investment reporting, public relations, and marketing. Additionally we make liberal use of consultants for other tasks. Outsourcing gives us a high quality infrastructure without distracting us from our core mission, or bloating our organization. As a result, we can devote ourselves to what matters to you: quality advice, personal relationships, and sophisticated investment management.
If you are looking for an alternative to business as usual on Wall Street, you might profitably consider the services of a Fee-Only Independent Registered Investment Advisor like Investor Solutions. Give us a call to see how we might help you.