By James I. Moore, CFP®

“If all you have is a hammer, everything looks like a nail.”

Some advisors can only select from a specific list of investment options provided by the company that employs them. If they can only sell annuities or insurance products, there is a good chance that they will find a way to recommend an annuity or insurance product. If they can only sell their company’s proprietary investment products, there is a good chance that they will find a way to recommend one of those investment products, regardless of whether it is the optimal solution for their client’s financial situation.

An independent financial advisor is different. Independent financial advisors do not receive mandates from any other company and can choose from all available solutions in the financial marketplace. They are not beholden to anyone’s interest except their client’s.

“How Are You Paid?”

Before working with any financial advisor, it is important to ask them how they get paid. Do they receive a commission for selling a product or when making trades on your behalf? Make sure that you receive a clear answer when asking this question and that you feel comfortable with any potential conflicts of interest. 

“Are You a Fiduciary?”

A financial advisor’s independence and method of getting paid are important when it comes to determining whether they are a fiduciary at all times. If an advisor is under the fiduciary standard of care, they are required to put their client’s interest ahead of their own.

It may surprise you, but not all advisors are held to the fiduciary standard of care. Some advisors operate under what is known as the suitability standard of care, which means they just need to be sure that the products they recommend to you are “suitable” for someone in your situation.

The definition for what makes something “suitable” is very broad, and unfortunately, the products do not necessarily have to be the best solutions available. 

Better Money Decisions

An independent financial advisor should be able to advise you on your entire financial life, not just your investments. By developing a comprehensive financial plan and assisting you with implementing and monitoring that plan, they can help you achieve your goals.

They can provide advice to help you make better money decisions in the areas of:

• Investment planning: An independent financial advisor can help you create an investment portfolio that is appropriate for your goals and risk tolerance. They will implement and monitor that portfolio, and sometimes provide the necessary behavioral coaching to encourage you to stick to an investment allocation even when the markets are overreacting. You can use the expertise and experience of the advisor as a sounding board for your financial ideas.

• Retirement planning: An independent financial advisor can run projections to help you answer the many questions surrounding retirement. Can you afford to retire? When should you elect Social Security benefits? How much can you safely spend each year in retirement? A financial advisor can help you create a sustainable retirement plan and provide the accountability to stay within your saving and spending goals.

• Tax planning: An independent financial advisor can help you minimize your taxes by doing things like investing tax-efficiently and creating a plan for distributions and charitable giving.

• Estate planning: An independent financial advisor can help you evaluate your needs and can connect you with an attorney to create any necessary estate planning documents, such as a will or a trust. The advisor can help you monitor your plan, assisting with steps like making sure accounts are titled correctly and beneficiaries are named to help ensure that your goals are met.

• Insurance planning: An independent financial advisor can be an objective resource to help you determine what types of insurance you may or may not need. Between the many types of insurance, such as homeowners, auto, life, umbrella, and long-term care, you may find it extremely valuable to receive advice from someone other than the one selling you the policy.

These are just a few of the areas in which our independent financial planning firm in Fullerton helps our clients and how an independent financial advisor could help you make better money decisions.

Schedule a 15-minute discovery call with an independent, fee-only financial advisor to discuss your personal situation.