A simple word that is so difficult to encounter
Trust
Recent history has given us plenty of reasons to be skeptical. From the collapse of major institutions like Bear Stearns and Lehman Brothers to the Madoff scandals and the bailouts of the Great Recession, trust in the financial industry has been shaken. More recently, we’ve navigated the unprecedented economic shutdown of the COVID pandemic and the burden of exorbitantly high inflation.
For many who have tried to "do it themselves," a lack of trust often stems from a lack of clarity. True comprehensive financial planning is built on a different premise: obtaining a deep, 360-degree understanding of your financial life—often understanding it even better than you do. We then combine that insight with the proper organizational structure, licensing and skills to implement a strategy that truly acts in your best interest as a fiduciary.
However, selecting a financial advisor you can trust involves much more than just checking boxes for licenses and skills. It’s about finding a partner who shares your values and understands the weight of the responsibility they carry for your family’s future.
Finding Trust
However, selecting a financial advisor you can trust involves much more than just checking boxes for licenses and skills. It’s about finding a partner who shares your values and understands the weight of the responsibility they carry for your family’s future.
Evaluate three criteria – core business, check and balance structure, and conflicts of interest.
1 Core Business: Because financial planning is a good way to “act in your best interest, is the financial advisory company’s business only financial planning – not investments, insurance, banking, tax preparation, etc.? Some firms offer financial advice to help sell their products.
2 Checks and Balances: Does the company’s operating structure include a separation of power and responsibility between completely independent organizations for a) compliance with laws as well as regulations, b) actual security trade clearing and c) your personal, independent financial planner? Some firms enforce their own compliance and clear their own investment trades. Many advisors promote an often-preferred, fee-based only business model for objectivity but also operate on a hidden high risk model for self-control of their own regulatory compliance.
3 Conflicts of Interest: Does the financial advisory company avoid conflicts of interest? Is the company publicly owned where the primary obligation is to the shareholders and not you? Is the company really independent and not affiliated or owned by a public company that could be influenced in the same way? Does the company have proprietary investment, insurance or banking products that have a priority to be sold to you?
Does the company have sales incentives, contests, bonuses or other compensation arrangements which would influence recommendations? Does the company accept “revenue sharing” - compensation from other companies to sell their preferred products? (By regulations, companies must publicly disclose this information to you.)
Evaluate three main criteria – licensing, experience and character.
1 Licensing: The Financial Industry Regulatory Authority (FINRA) offers various categories of investment licenses. Suffice it to say that advisors holding a Series 7 license are allowed to offer and service a broader array of investment products than investment brokers holding a Series 6 license.
In addition, there are separate licenses for securities agents and Investment Adviser Representatives (IAR). A financial planner is required to hold a Series 65 or Series 66 if they offer advisory service. Other licenses for securities agents or brokers may limit their services to product offerings. A Registered Investment Advisor (RIA) is a registration with the Securities and Exchange Commission (SEC) by reaching $25 million in assets under management who regulates their own compliance to laws and regulations. If a RIA does not reach $25 to $30 million of assets, they register with the state.
Also, the financial planner should be registered with the state in which the consumer resides as a general lines insurance agent for life, accident and health.
A financial planner should obtain these three types of licenses—Series 7, Series 66 and the State Insurance.
You can find the background and complaints for financial companies and specific advisor/agents at the following websites: www.tdi.tx.state.us and www.finra.org.
2 Experience: Experience should not just be limited to financial planning, but also for life experience. Does the financial planner strictly practice the principals of financial planning? Many advisors and financial planners will transfer your 401(k) or IRA account and invest your money without a financial plan. Do they have the life experience of marriage, children, employment changes, owning a home, owning a business, etc.?
Credentials may have a limited influence on any decision to find the right financial planner to work with. You may hear about a variety of certifications. However, all registered financial advisors are required to undergo continuing education. (Money Concepts financial planners attend a minimum of thirty hours of classroom education each year, over twice the industry average.) Some professional certifications don’t require one to be practicing or even doing business as financial planners. Plus credentials certainly don’t make anyone more ethical.
3 Character: Ultimately there is no guarantee for ethics and integrity. But after following the above guidelines then examining a financial planner’s business practices and lifestyle you can get a clue to their character. Is the financial planner actively preparing and producing your personal financial plan? Or is it relegated to other administrative staff? Does the financial planner belong to and active in a church? Do they perform community service? Are they extravagant in their lifestyle or possessions ?
The message is this: The opportunity for your financial success may improve when personal goals are known and understood by a financial planner who is paying attention and has the experience and techniques to implement financial plans to help meet your complex and ever-changing needs over time.
Contact me to establish your complimentary financial review at your convenience. Call 713-899-3945 or email now at kgaug@moneyconcepts.com.
First, how to select the company:
Evaluate three criteria – core business, check and balance structure, and conflicts of interest.
1 Core Business: Because financial planning is a good way to “act in your best interest, is the financial advisory company’s business only financial planning – not investments, insurance, banking, tax preparation, etc.? Some firms offer financial advice to help sell their products.
2 Checks and Balances: Does the company’s operating structure include a separation of power and responsibility between completely independent organizations for a) compliance with laws as well as regulations, b) actual security trade clearing and c) your personal, independent financial planner? Some firms enforce their own compliance and clear their own investment trades. Many advisors promote an often-preferred, fee-based only business model for objectivity but also operate on a hidden high risk model for self-control of their own regulatory compliance.
3 Conflicts of Interest: Does the financial advisory company avoid conflicts of interest? Is the company publicly owned where the primary obligation is to the shareholders and not you? Is the company really independent and not affiliated or owned by a public company that could be influenced in the same way? Does the company have proprietary investment, insurance or banking products that have a priority to be sold to you?
Does the company have sales incentives, contests, bonuses or other compensation arrangements which would influence recommendations? Does the company accept “revenue sharing” - compensation from other companies to sell their preferred products? (By regulations, companies must publicly disclose this information to you.)
Second, how to select the advisor:
Evaluate three main criteria – licensing, experience and character.
1 Licensing: The Financial Industry Regulatory Authority (FINRA) offers various categories of investment licenses. Suffice it to say that advisors holding a Series 7 license are allowed to offer and service a broader array of investment products than investment brokers holding a Series 6 license.
In addition, there are separate licenses for securities agents and Investment Adviser Representatives (IAR). A financial planner is required to hold a Series 65 or Series 66 if they offer advisory service. Other licenses for securities agents or brokers may limit their services to product offerings. A Registered Investment Advisor (RIA) is a registration with the Securities and Exchange Commission (SEC) by reaching $25 million in assets under management who regulates their own compliance to laws and regulations. If a RIA does not reach $25 to $30 million of assets, they register with the state.
Also, the financial planner should be registered with the state in which the consumer resides as a general lines insurance agent for life, accident and health.
A financial planner should obtain these three types of licenses—Series 7, Series 66 and the State Insurance.
You can find the background and complaints for financial companies and specific advisor/agents at the following websites: www.tdi.tx.state.us and www.finra.org.
2 Experience: Experience should not just be limited to financial planning, but also for life experience. Does the financial planner strictly practice the principals of financial planning? Many advisors and financial planners will transfer your 401(k) or IRA account and invest your money without a financial plan. Do they have the life experience of marriage, children, employment changes, owning a home, owning a business, etc.?
Credentials may have a limited influence on any decision to find the right financial planner to work with. You may hear about a variety of certifications. However, all registered financial advisors are required to undergo continuing education. (Money Concepts financial planners attend a minimum of thirty hours of classroom education each year, over twice the industry average.) Some professional certifications don’t require one to be practicing or even doing business as financial planners. Plus credentials certainly don’t make anyone more ethical.
3 Character: Ultimately there is no guarantee for ethics and integrity. But after following the above guidelines then examining a financial planner’s business practices and lifestyle you can get a clue to their character. Is the financial planner actively preparing and producing your personal financial plan? Or is it relegated to other administrative staff? Does the financial planner belong to and active in a church? Do they perform community service? Are they extravagant in their lifestyle or possessions ?
The message is this: The opportunity for your financial success may improve when personal goals are known and understood by a financial planner who is paying attention and has the experience and techniques to implement financial plans to help meet your complex and ever-changing needs over time.
Contact me to establish your complimentary financial review at your convenience. Call 713-899-3945 or email now at kgaug@moneyconcepts.com.
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